Consumer inflation edged higher in June. Stats SA data show that the annual consumer price inflation was 3% in June, up from 2.8% in May.
The main positive contributors to the 3 percent annual inflation rate were housing and utilities, food and non-alcoholic beverages, and alcoholic beverages and tobacco.
Between May and June, the CPI increased by 0.3%.
Consumer inflation is at its highest in four months; however, it remains below the mid-point of the Reserve Bank’s target bracket, indicative that inflation remains contained.
Food price inflation rose to the highest level in 16 months, at 4.7% in June, up from 4,4% in May.
Prices of fruits and nuts, vegetables and hot beverages remain elevated.
The prices of meat, particularly beef, processed foods, and oils and fats, also remained high.
Agricultural economist Wandile Sihlobo says the outbreak of animal diseases could be to blame for price increases in the meat category, citing avian flu in Brazil and foot-and-mouth disease here at home.
“On meat, for example, there are two things that we have struggled with as a country. At some point over the past few months, we saw that Brazil, which is one of the key suppliers of poultry products in South Africa, had avian influenza that led to a temporary ban on Brazilian poultry products in South Africa. This caused a little bit of anxiety in the market as people were worried about supplies. The second aspect is the foot-and-mouth disease, which also caused a little panic in the market, and I think that led to a little bit of panic buying, but now both of those factors are now somehow well managed. for example s.a has resumed the imports of poultry products from brazil, we see the major feedlots have started slaughtering and everytime we have foot & mouth we are restricted in terms of exporting the red meat, and that restriction in exports over time, it leads to an icnrease in the red meat supplies in the s.a market and that may lead to the softening of meat prices in the SA market.”
The relatively low consumer inflation level leaves the door open for the Monetary Policy Committee of the Reserve Bank to further cut rates.
Economists expect a 25 basis point cut at next week’s meeting.
Senior Economist at Standard Bank Group, Dr Elna Moolman says, “After falling below the Reserve Bank’s 3-6 target range for 3 consecutive months, consumer inflation reentered the target band as we expected in june this year, inflation remains quite low and this prpvides support for consumer spending even the most wage increases are higher than this prevailing rate of inflation, it also arguably provides support for the sarb to be able to cut interest rates at the upcoming rates meeting next week, however we do expect inflation to trend higher in the coming months which will reduce this tailwinds for consumers.”
Food price inflation is expected to moderate in the coming months.
Sihlobo says this is a result of good grain and fruit harvests. He says meat prices should also ease as supplies recover.
