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Consumer price inflation eased in February

Screen Shot 2021-04-07 at 10.56.15 AM

Source: Sarah Smit, Mail & Guardian, 24 Mar 2021, photo credit: Adobe Stock/Business Maverick

Consumer price inflation (CPI) edged lower to 2.9% in February 2021, down from 3.2% in January 2021. According to Statistics South Africa (StatsSA), the main contributors to the 2.9% annual inflation rate were food and non-alcoholic beverages, housing and utilities, and miscellaneous goods and services.

Food and non-alcoholic beverages increased by 5.2% year-on-year, and contributed 0.9% to the total CPI annual rate of 2.9%.

In its release on Wednesday 24 March, StatsSA noted that the ban on alcohol sales from retail outlets, restaurants, bars and hotels in January, meant that there were no base prices available for comparison in February. The monthly changes were thus estimated using the headline change in the CPI for February. Tickets for sports games were also estimated.

Though CPI has softened year on year, South Africa inflation is expected to edge higher in the coming years.

Higher petrol and electricity prices are expected to drive up price inflation throughout the economy. 

Earlier this month, the Central Energy Fund forecast that petrol is set for a 90 cents-a-litre rise in April. 

Responding to the forecast, the Automobile Association of South Africa said: “The cost is not only direct, but throughout the value chain, and is battering consumers from all sides. It requires urgent review to help ease pressure on consumers who are battling to stay financially afloat.”

Electricity tariffs are also set to rise. From the start of July electricity prices will be hiked by 14.6%, according to the National Energy Regulator of South Africa.

Nedbank economists forecast that inflation is expected to gradually edge higher in 2021, off the low base established in 2020. They expect inflation to average around 4.5% over the next three years.

In January the South African Reserve Bank’s monetary policy committee (MPC) forecast that headline consumer price inflation would be 4% in 2021, 4.5% in 2022 and 4.6% in 2023.

But the Nedbank economists expect that the Reserve Bank will revise its January inflation forecasts upwards, mainly due to global oil price developments.

The MPC is meeting this week and is set to make a rates announcement on Thursday.

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