The latest inflation data shows no respite for consumers as headline consumer price inflation inched 0.1 percentage point higher to 7.1% y/y in March 2023 from 7.0% y/y in February, according to the update from Statistics South Africa. The CPI lifted from 0.7% m/m last month to 1% m/m in March 2023. Gains in prices in food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services categories underpinned this stickiness on the upside in the CPI outcomes. Food and non‑alcoholic beverages were the biggest contributor with 2.4 percentage points, rising by 14% y/y from 13.6% y/y previously. Food alone rose to a new record high since March 2009 at 14.4% y/y and lifted 1% m/m in March 2023.
In the food basket, the bread and cereals category still posted the highest increase of 20.3% y/y although below the 20.5% y/y pace recorded in February 2023. This again reflects the delayed passthrough of the recent moderation in grain prices at producer level. Thus, manufactures are still carrying the high cost of grain prices from 2022 due to the lag of up to five months in the pass through to the consumer level. Persistent and steep loadshedding in 2023 has further exacerbated the situation. Bear in mind that this category’s weight is significant in the food basket at 21%.
Although still elevated at double digit levels, meat with a higher weight of 35% in the food basket slowed from 11.4% y/y in February 2023 to 106% y/y in March 2023 and was unchanged m/m. We have seen a significant pullback in producer prices in the past few months hence the softening at consumer level.
Vegetables continued to surprise on the upside, coming up by a whopping 20.5% y/y and lifting by 3.8% m/m due to production challenges in various categories. Fruits also jumped 5.2% y/y but slowed to 0.9% m/m from 1.2% m/m previously.
Meanwhile, unrelenting cost pressures emanating from load shedding will continue maintaining the stickiness in food prices in the short term. However, monthly prices on both the domestic and international markets continue to trend on the downside recently which has the potential to limit further upside in consumer prices in the second half of 2023. Furthermore, global food inflation remains on the downside as per the United Nations Food and Agriculture Organization’s March 2023 update that showed a twelfth consecutive month at -2.1% m/m. The FAO food prices inflation dropped to a low of -20.5% y/y and was in negative territory for the fifth consecutive month. Fortunately, the domestic summer crop season is expected to end on a high note with a good harvest given the excellent seasonal conditions which bodes well for food inflation in the months ahead.
