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Inflation picks up again, but remains below its May peak

Published Sep 22, 2021


After moderating to 4.6% year-on-year in July (from 4.9% in June), Consumer Price Index (CPI) inflation rose to 4.9% year-on-year in August, StatsSA announced today. FNB economist Koketso Mano says this was in line with FNB’s and the consensus expectation.

Mano says major contributors to the uptick in the inflation rate were transport (transport, excluding fuel, increased 0.7% month-on-month and 5.2% year-on-year) and alcoholic beverages and tobacco (0.6% and 5.0%).

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After slowing to 15.2% y/y in July, fuel inflation accelerated to 19.6% year-on-year and 4.9% month-on-month.

Electricity prices increased by 0.3% month-on-month to post 13.9% for the year to the end of August.

Food and non-alcoholic beverage (NAB) inflation increased to 6.9% year-on-year, from 6.7%. The subcategories driving this pressure were meat (up 0.8% month-on-month and 10.7% year-on-year), vegetables (1.4% and 5.6%t), and other foods (0.9% and 5.0%. Other items, such as bread and cereals, posted negative monthly pressure and limited the pressure to total food and NAB, Mano says.


Mano says: “Headline inflation has ticked up, but May’s 5.2% year-on-year remains the peak, as we expect annual headline inflation to remain around current levels in the near term. While fuel inflation should accelerate further, food and NAB inflation should slow. With the update of today’s data, headline inflation should be 5.0% in September and average 4.5% in 2021. Petrol prices increased by 4c per litre in September and there is an over-recovery of 18c with 16 days of data for October, suggesting moderate relief, but annual inflation will remain elevated. Core inflation should remain closer to 3%, bar any surprises from housing inflation’s print in September. Food inflation should decelerate from current levels, ending the year closer to 5%.

“Supply disruptions remain a major risk to our near-term inflation forecast, and we continue to monitor import unit values for consumer-related goods. Other risks are from rand and oil price volatility, the latter driven by supply-side concerns.

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“The MPC announces its interest rate decision tomorrow. The inflation starting point should not be too much of a concern, except for second-round effects from supply-side inflation, but weak demand should constrain those effects.

“Survey outcomes to look out for in September are the housing survey (weighing 16.84% in total CPI), domestic worker wages (2.45%), taxi, bus and train fares (1.67%), as well as vehicle insurance (0.58%).”


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