The latest update on South Africa’s consumer price inflation showed a further slowdown to 4.4% y/y in August 2024, which is a 40-month low and now back below the SARB’s target midpoint of 4.5%. Monthly pressures from food and electricity saw headline inflation edging up marginally by 0.1% m/m but still below the July gain of 0.4% m/m.
Food inflation however ended its 8-month deceleration, ticking 4.1% higher y-y in August 2024 and back at the June 2024 level. Except for the July 2024 outcome, food inflation remains at its lowest level in fifty months. Most of the food subcategories posted slight increases including “bread and cereals”, meat, fish, “milk, cheese and eggs”, “oils and fats”, and vegetables. The magnitude of “bread and cereals” increases was surprisingly timid given the runaway grain prices due to the drought-induced harvest contraction in 2024.
On the back of a 21% y/y drop in the 2023/24 maize harvest to just 13.03 million tons coupled with a strong import demand for the white maize category from the Southern Africa region, prices surged by 48% y/y to just over R5,350/t with the Dec-24 futures already closer to R5,500/t in recent trades.
Monthly food inflation rebounded marginally from -0.1% m/m to 0.2% m/m in August with most categories posting gains except for meat which declined by 0.4% m/m and “sugar, sweets and desserts” falling by 0.2% y/y.
Vegetable inflation posted the biggest percentage increase of 1ppts from the previous month at 4.4% y/y which reflects the black frost impact on big-ticket items such as potatoes and tomatoes that rose by 8.6% and 14.8% y/y, respectively.
This uptrend is likely to persist near term given the supply constraints of certain categories from Limpopo. Average potato prices to mid-September 2024 on major markets were already up by 21% m/m and 12% at R9.86/kg which is 44% and 58% higher than the year-to-SEP 2024 and the 3-year averages, respectively. For tomatoes, prices rose by almost 30% m/m and 96% y/y to R12.54/kg during the same period.
Nonetheless, given the combination of the improved weather outlook with the La Nina weather pattern in the forecast for the 2024/25 agriculture, a strong global supply outlook, and a renewed stronger rand exchange rate, we can expect a moderation in prices across most commodities for the year ahead.
