Statistics South Africa has published its latest consumer price index, showing that annual consumer price inflation has broken through the upper limit of the Reserve Bank’s target range for the third consecutive month.
Inflation was recorded at 7.8% in July 2022, up from 7.4% in June 2022. The July rate remains the highest reading since May 2009 (8%), when the economy was facing the headwind of currency depreciation during the global financial crisis.
Core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, quickened to 4.6%, breaching the midpoint of the central bank’s target range of 3% to 6% for the first time in more than four years. The Reserve Bank’s monetary policy committee prefers to anchor inflation expectations close to 4.5%.
It remains at a level last seen during the global financial crisis and is now the fastest inflation of Lesetja Kganyago’s tenure as central bank governor.
Kganyago has told lawmakers that headline inflation may be nearing a peak, though growing underlying price pressures may see the MPC continue its aggressive interest-rate hiking cycle.
In July, fuel prices were hiked by more than 10%. This hit transport prices in particular, with taxi fares up 9% in a single month. Taxi fares were 16% higher than a year ago. Petrol is 56% more expensive than it was a year ago. Transport increased by 25% year on year and contributed 3.4 percentage points.
The latest consumer inflation rate reflects the annual increase in municipality service tariffs, which are adjusted in July every year.
Electricity tariffs increased on average by 7.5% – which is lower than last year’s rise of 13.8% but higher than the 2020 increase of 6.3%, Statistics SA reports.
But services inflation (+4.2%) and durable goods prices (+4.8%) remained much cooler than non-durable goods inflation – mostly driven by food – which is now at 14.4%.
Housing and utilities increased by 4.0% year on year and contributed 1.0 percentage point.
Miscellaneous goods and services increased by 3.6% year-on-year and contributed 0.5 of a percentage point.
In July the annual inflation rate for goods was 11.5%, up from 11.0% in June; and for services, it was at 4.2%, up from 3.9% in June.
Inflation is being driven higher by food and fuel inflation, which both recorded the highest rates for July. However, the introduction of higher electricity rates from municipalities – which took effect in July – also contributed to the higher number.
Food inflation hit 10.1% in the month, driven by bread and cereals and oils and fats – two major exports that have been hit globally by the ongoing war in Ukraine.
However, the entire food segment has seen prices much higher and now fall outside the Reserve Bank’s inflation target of 3%-6%, including fish, meat, vegetables and confectionery.
The list below shows which basket items are above July’s inflation number and those which fall outside the target band.
- Fuel: +56.2%
- Oils and fats: +36.2%
- Public transport: +22.0%
- Bread and cereals: +13.7%
- Processed food: +12.9%
- Fish: +9.7%
- Meat: +9.4%
- Other food: +9.0%
- Vegetables: +8.3%
- Electricity: +8.1%
- Spirits: +7.9%
- Sugars, sweets and desserts: +7.5%
- Unprocessed food: +7.5%
- Hot beverages: +7.0%
- Appliances: +6.5%
- Restaurants: +6.5%
- Other running costs for transport: +6.4%
- Vehicle purchases: +6.3%