Inflation cools slightly to 7.2 pc, but food prices remain red hot

Compiled by Helena Wasserman

Annual consumer price inflation cooled to 7.2percent in December, down from 7.4 percent in November and 7.6 percent in October, Statistics SA reported on Wednesday.

December’s inflation rate was slightly lower than economists expected. The median forecast of 15 economists in a Bloomberg survey was 7.3 percent.

The consumer price index increased by 0.4 percent in December from the previous month.

Prices of food and non-alcoholic beverages rocketed by 12.4 percent year-on-year, only slightly down from 12.5 percent in November.

Bread and cereal prices were 20.3 percent higher in December 2022 than a year earlier, while oils and fats (+22%) were also much more expensive. Meat prices rose 10 percent in 2022, while vegetables increased by 12 percent.

While South Africa has enjoyed bumper crops, fuel price hikes and load shedding have pushed prices higher.

Transport costs were almost 14% higher in December 2022 compared to a year ago, even after sizeable cuts in the price of diesel at the start of the month. Following further declines at the start of January, the petrol price is back to levels last seen before the invasion of Ukraine triggered an oil price surge.

The SA Reserve Bank only expects inflation to “sustainably” move back to its targeted level of 4.5 percent by the second quarter of 2024.

With inflation still far above its target level, traders expect the Reserve Bank to increase interest rates when the monetary policy committee (MPC) meets again on 26 January.

The prime rate has already moved from 7 percent in November 2021 to 10.5 percent currently, as the MPC attempts to cool inflation.

Average annual consumer price inflation for 2022 was 6.9 percent, the highest rate since 2009, Bloomberg reported. The average inflation rate in 2021 was 4.5 percent.