BL Premium reports that consumer inflation slowed for the third consecutive month in January to 6.9% from December’s 7.2%. This was its lowest level since May, but the reading was still well above the SA Reserve Bank’s (SARB’s) 3-6% target range.
Analysts warned that rising food inflation and rand weakness – mainly as a result of dollar strength – would remain upside risks to the inflation outlook. According to Stats SA data, the decrease in consumer inflation was mainly a result of a notable fall in the price of fuel. But prices in the “food and nonalcoholic beverages” category were sharply to the upside, rising 13.4% on an annual basis, the highest level since April 2009. Core inflation, which excludes short-term price shocks such as food and fuel prices, stood at a three-month low of 4.9% in January, unchanged from the prior month. Absa’s Peter Worthington noted that even though the SARB’s monetary policy committee (MPC) would be comforted by the easing headline inflation and steady core CPI inflation, “we believe that they will be worried about the implication of rising food inflation on wage settlements”. He commented: “Rising food inflation along with elevated inflation expectations could be an important driver of upward pressure on wage inflation.” Other upside risks to inflation include the recently announced 18.65% increase in electricity tariffs, broadly expected to be reflected in headline inflation from July.
- Read the full original of the report in the above regard by Thuletho Zwane at BusinessLive (subscriber access only)
- Read too, Inflation cools, but red-hot food prices hit new high, at Fin24
Get other news reports at the SA Labour News home page