Food prices to remain high despite easing of consumer price inflation
Share this article:
FOOD prices could remain relatively high in the short- to medium-term period due to recent supply disruption, in spite of consumer inflation easing from a 30-month high in June, analysts said yesterday.
Data from Statistics South Africa (StatsSA) yesterday showed that annual consumer price index (CPI) eased to 4.9 percent year-on-year in June from 5.2 percent in May. The CPI, however, rose slightly by 0.2 percent in June from 0.1 percent in May.
StatsSA said the change in the June CPI print was driven by food and non-alcoholic beverages as prices remained unchanged at 6.7 percent in this category. However, StatsSA said there was an average price increase of 0.2 percent between May and June in this category.
Nedbank senior economist Nicky Weimar said the trend of elevated food prices was likely to continue to raise the cost of living overall.
“Although prices are expected to return to trend in the months ahead, food and fuel supply constraints caused by the recent unrest in crucial parts of the country pose significant upside risks to the outlook,” Weimar said.
“Furthermore, concerns over the surge in global inflation and the earlier-than-expected normalisation of global monetary policy also poses upside to the inflation outlook.”
StatsSA’s chief director for price statistics Patrick Kelly said the prices of oils and fats continued to surge, registering the highest annual increases in June.
“Cooking oil products in particular have recorded sharp increases. In June 2020, the average price of a 750ml bottle of sunflower oil was R20.99, rising to R29.45 in June 2021,” he said.
Core inflation currently sits at 3.2 percent from 3.1 percent previously.
Fuel prices in June recorded a third month of double-digit inflation of 27.5 percent, while the accommodation inflation edged higher.
FNB economist Koketso Mano said though the extent of the disruption due to civil unrest last week was not yet clear, food inflation should remain relatively elevated.
Mano said risks were that a disruption to processing and distribution networks following the civil unrest could place upward pressure on non-essential food products.
“Panic buying could be another source of upward pressure on goods inflation,” Mano said. “Still, our view is that overall demand remains muted, especially with the number of jobs currently at risk as well as low consumer confidence.”
The rand has also placed further risks to the inflation outlook as it continued to weaken yesterday, touching R14.73 to the dollar as all emerging markets currencies fell on fears that the highly contagious Delta coronavirus variant might stall a global economic recovery and drove investors to safer assets.
Anchor Capital’s investment analyst Casey Delport said the rand’s trajectory will still likely drive the timing and pace of the pending interest rate hiking cycle by the SA Reserve Bank.
“The sharply higher food and fuel prices may lift the bank’s near-term inflation forecasts and the bank may also express concern about the inflationary consequences of the unrest,” Delport said.