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<\/a><\/p>\nFuel<\/strong><\/p>\n Fuel inflation has been a key driver of the softening, owing to the combination of some cooling in Brent crude oil prices and base effects, Absa said.<\/p>\n It noted, however, that while fuel prices are important for the path of headline CPI inflation, these can also be highly volatile.<\/p>\n The bank’s baseline forecast assumes that Brent crude oil prices would track sideways, just below 90$ per barrel over this year’s first half, then drifting down to 80$ per barrel by the end of 2024.<\/p>\n “Given our exchange rate forecast, this leaves fuel inflation falling sharply from 26.1% y\/y in Q4 22 to just 2.2% by Q2 23 and -7.4% by Q3 23, said Absa.<\/p>\n Although Absa’s predictions show a downward trend in fuel prices, the BER noted that a weak rand and rising global prices might see motorists face an increase at petrol stations in March.<\/p>\n The Central Energy Fund’s latest data points to the price of petrol increasing by R1.20 per litre and diesel by around 40 cents per litre due to under-recovery.<\/p>\n The graph below shows fuel inflation expectations easing from the start of January this year:<\/p>\n Food<\/strong><\/p>\n According to Absa, food prices have started to ease, with domestic crop prices also softening.<\/p>\n The easing cost of production appears to be transmitted to food producer prices, said Absa.<\/p>\n Consumer food inflation also appears to have peaked after easing just marginally in December for the first time in eight months to 12.4% y\/y.<\/p>\n With global food prices seemingly contained, the bank expects domestic food price inflation to ease further, averaging 7.6% this year and 4.6% in 2024 versus 9.2% in 2022, said Absa.<\/p>\n Despite this, knock-on effects from continual load shedding continue to take a toll on the agricultural industry – threatening food security<\/a><\/strong> at large in South Africa.<\/p>\n Farmers in both meat and harvesting industries have reported that load shedding is wreaking havoc on businesses.<\/p>\n Roelie van Reenan, an executive at Beefmaster Group, said that unrelenting load shedding is taking a toll on farming infrastructure – pushing up the cost of production.<\/p>\n Increases in production costs are often passed on to the consumer and may lead to shortages or price hikes.<\/p>\n The graph below highlights the deflation in domestic producer prices:<\/p>\n<\/a><\/p>\n<\/a><\/p>\n