Statistics South Africa (StatsSA) reported on April 17th that consumer price inflation increased from 4.1% year-on-year (y-o-y) in February to 4.5% y-o-y in March. This was the 24th-straight month that headline inflation was within the South African Reserve Bank (SARB) target range of 3%-6%. This enabled the central bank’s Monetary Policy Committee (MPC) to keep interest rates unchanged at its latest a meeting late in March. The latest StatsSA report (available here) comes shortly after the SARB commented that it expects inflation to average 4.8% during 2019.

The increase in headline y-o-y inflation during March was associated mainly with increases in inflation of transport and education. The cost of fuel increased by 5.1% month-on-month (m-o-m) and was 8.8% y-o-y more expensive in March after a 74c/l fuel hike associated with higher oil prices. The higher fuel price was the main contributor to private transport operation costs increasing 4.3% m-o-m and 8.0% y-o-y in March. Transport costs 6.4% more than in March 2018. Average education costs also rose by 6.7% m-o-m and y-o-y.

Food price inflation was measured at 2.3% (y-o-y) in March. The SARB warned last month that it expected food price inflation to have bottomed out in the first quarter of 2019 before rising to a peak of 5.9% in the second quarter of next year. A major local food company recently comment that it expects increased food price inflation in the short term due to exchange rate movements, higher fuel and electricity costs, as well as an increase in other raw material input costs. Farmers that are dependent on irrigation have experienced significant pressures on their operations due to the reliance of their irrigation systems on electricity. This is evident from the y-o-y price increases of 9.4% and 7.6% for vegetables and fruit in March.

 

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Issued by PWC