Data from Statistics South Africa (Stats SA) shows that the Consumer Price Index, or inflation, slightly eased to 5.2% in April – down from 5.3% in March and 5.6% in February.
The institution said general food inflation slowed over that period except for fresh produce and hot beverages.
“On average, vegetable prices increased by 7.4% in the 12 months to April, higher than the 6.0% increase recorded in March. Vegetable products that recorded relatively high price increases include potatoes, frozen potato chips, broccoli and beans.
“The annual rate for fruit rose from 3.3% in March to 4.5%, mainly driven by higher prices for bananas and apples. Hot beverage inflation increased marginally from 11.2% to 11.4%. The rates for instant coffee and black tea remain in double-digit territory,” Stats SA said.
The inflation for bread and cereal also slowed for the 12th month in a row in April.
“The annual rate eased to 4.3% from 5.0% in March. Bread flour, cake flour, ready-mix flour, white bread, pasta, rusks, savoury biscuits and maize meal are cheaper than a year ago.
“The average price of a loaf of white bread was R18.43 in April 2024, down from R19.07 in April 2023. On the other hand, sharp price increases were recorded for rice, pizzas and pies, instant noodles and sweet biscuits. Annual rice inflation accelerated to 26.4%, the highest reading since May 2009 when the rate was 41.9%,” the institution said.
The annual rate for sugar, sweets and desserts also slowed to 16.8% in April with egg inflation also cooling for the fifth month in a row.
“[This] after peaking at 39.9% in November 2023, then receding to 25.1% in April 2024. Except for whiteners, condensed milk, Gouda cheese and fresh cream, most products in the milk, eggs and cheese category recorded lower annual rates in April. This pulled overall inflation for the category down to 8.7% from 10.1% in March,” Stats SA said.
Investec chief economist Annabel Bishop noted earlier this month that the Reserve Bank foresees a slow drop off in its target inflation measure, the CPI inflation rate, over the course of this year, and next, only reaching 4.5% y/y towards the end of 2025.
"This forecast scuppers any chance of an interest rate cut this year, and makes one likely only towards the end of 2025, if at all, as the SARB has said it will not cut SA’s interest rates until CPI inflation remains around 4.5% year-on-year."
"While a better-than-expected CPI inflation outcome for this year is possible, and we currently have lower forecasts than the SARB on CPI, expecting it to reach 4.5% in Q4.24, and so a quicker cut, risks remain to this view," said Bishop.
South Africa’s FRA curve has factored out the possibility of interest rate cuts for this year, she continued, flattening out after the MPR was digested by markets, while the markets also do not currently see cuts in the repo rate next year either.
The rand, key for the inflation outlook, has strengthened recently however, Bishop said.
The rand is also important for food prices in SA, with international food prices a driver of domestic food price inflation, given SA is an import-or export-parity price taker.
"The stubbornness of inflation, which has not dropped to the targets of either major advanced economies or South Africa as underlying pressures are sticky, has been the key reason for the delay in interest rate cuts."
The South African Reserve Bank's key lending or repo rate is currently 8.25%, with the prime lending rate for consumers at 11.75% – levels that have held since May 2023.
“Despite this better-than-expected outcome, with the South African Reserve Bank increasingly signalling its preference for a 3% point inflation target, we expect no policy rate easing until November,” said Razia Khan, chief economist for Standard Chartered Bank.
The economist said that more pronounced currency gains, likely by way of a post-election rally in South African assets could influence the inflation outlook sufficiently to allow for earlier easing.
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