JOHANNESBURG – Statistics South Africa (StatsSA) announced on Wednesday that annual consumer price inflation quickened to 6,5% in May from 5,9% in April and March, breaking through the upper limit of the South African Reserve Bank’s monetary policy target range.
This is the highest reading since January 2017 when the rate was 6,6%.
The impact of fuel prices
Transport and food and non-alcoholic beverages (NAB) accounted for just over half of the annual rate, with sharp price increases recorded in both categories.
Fuel in particular continues to be a major contributor: if the impact of fuel is removed from the CPI reading in May, the headline rate falls to 5,1% from 6,5%.
Diesel prices jumped by 8,1% between April and May, taking the annual rate to over 45%.
The average price of a litre of diesel in May 2021 was R16,20 – meaning it cost R729 to fill a 45-litre tank.
Twelve months later, with the average price at R23,67 per litre, filling the same tank cost R1 065.
Petrol prices moderated between April and May, edging lower by 0,7%. Despite this decline, petrol is almost 27% more expensive than it was in May 2021.
Stats SA chief director for price statistics Patrick Kelly said transport and food and non-alcoholic beverages accounted for just over half of the annual rate, with sharp price increases recorded in both categories.
Kelly said fuel in particular continued to be a major contributor as the headline rate falls to 5.1 percent from 6.5 percent if the impact of fuel is removed from the CPI reading in May.
“Diesel prices jumped by 8.1 percent between April and May, taking the annual rate to over 45 percent. The average price of a litre of diesel in May 2021 was R16.20 – meaning it cost R729 to fill a 45-litre tank,” Kelly said.
“Prices for food and non-alcoholic beverages jumped by 2.1 percent between April and May, representing the largest monthly increase since February 2016 when the monthly rise was also 2.1 percent. At that time the country was experiencing a severe drought.”
On a monthly basis, consumer prices were up 0.7 percent after increasing 0.6 percent in April, and above market forecasts of a 0.3 percent increase.
Stats SA said the annual core inflation, which excludes prices of food, non-alcoholic beverages, fuel and energy, quickened to 4.1 percent in May, the highest since August 2019, from 3.9 percent in April.
Cooking oil prices continue to soar
Prices for food and NAB jumped by 2,1% between April and May, representing the largest monthly increase since February 2016 when the monthly rise was also 2,1%. At that time the country was experiencing a severe drought.
The oils and fats product group continues to witness sustained levels of high inflation. The annual rate was 26,9% in May, representing the 17th month that the rate has been above 10% (since December 2020). Prices jumped by 10,1% between April and May, representing the first time since 1997 that the monthly rate was above 10%.
Sunflower oil, the product with the highest weight in the oils and fats group, is almost 40% more expensive than it was a year ago. Prices jumped by 16,1% between April and May.
The monthly rate for bread and cereals was 3,4%, taking the annual rate to 8,4%. Maize meal recorded a monthly increase of 5,1% and a loaf of white bread was 3,7% more expensive.
Annual meat inflation has remained above the 6% mark since November 2020, with the reading for May 2022 at 9,4%. Prices for individually quick frozen (IQF) chicken portions and stewing beef increased by 13,7% and 12,2% respectively in the twelve months to May.
Luigi Marinus, Portfolio Manager at PPS Investments, told Business Report, “This marks a breach of the top end of the inflation target band and the highest inflation level for more than five years, when year-on-year inflation reached 6.6% in January 2017. It also results in inflation now averaging slightly less than 6% for 2022 to date. Month-on-month inflation increased by 0.7%, which was slightly higher than the 0.6% increase the previous month.”
Marinus further said, “or the fourth consecutive month transport was the largest contributor to inflation (2.1%), which was similar to the three previous contributions. Other large contributors were food and non-alcoholic beverages (1.3%) and housing and utilities (1.2%). All 11 inflation groups had a positive contribution to inflation, and all were either equivalent to or higher than the contribution in April, highlighting the widespread positive inflation trajectory.”
“Although local inflation is a concern, the action of the US Federal Reserve may have a larger influence on asset prices globally as they balance increasing interest rates to reduce their extremely high inflation level against the negative effect that may have on GDP growth. As a result of this concern, at PPS we have reduced our equity exposure to neutral overall, but favouring local over global equities, remain constructive on local bonds where high yields are still on offer and started increasing cash exposures across funds to mitigate possible stock market volatility,” Marinus said.