Drastic Drop in Consumer Price Inflation

South Africa’s headline consumer inflation slowed sharply to 3.9% year-on-year in February from 4.4% in January, data from Statistics South Africa showed this morning. Prices were up 0.6% month-on-month, having contracted by 0.2% previously. Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, was unchanged at 5.8% year-on-year, but quickened to 1.3% month-on-month from 0.4%.

The Inflation Factory (TIF)’s real time CPI index stood at 110.8 at the end of February, implying year-on-year inflation of 3.3% and month-on-month inflation of 0.0%. This was off by 0.6%, the first time since November that the TIF have not accurately predicted the CPI.Writing in his monthly newsletter on Tuesday, TIF founder Riyadh Bhyat said: “This is a significant decrease in headline CPI (1.1% lower than last month, and 2% lower than two months ago). “This is the lowest CPI result for over four years and has largely been driven by February’s 8.5% decrease in the petrol price.”

“As we showed last month, an important insight from the last six months is to understand what headline CPI would have been if the petrol price had not decreased as it has.” The result can be seen in the graph on the right, which provides a hint at how quickly CPI may begin to increase in a higher oil price environment!

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