After last month’s figures already saw the annual consumer inflation rate reaching 7.4%, StatsSA has just released the figures for July with an updated inflation rate of 7.8% (y/y), a further 13-year high!
The main “culprits” for this significant 1.5% hike from June to July (m/m) were the annual food inflation, which rose by 9.7% in July, from 8.6% in June, and Bread and cereals prices that were 13.7% higher than a year ago. Between June and July, there were large monthly price hikes reported in a range of products, including, maize meal (4.2%), cake flour (6.3%), macaroni (5.0%) and white bread (2.8%). But rice prices fell by more than 3%,
Oils and fats saw the biggest price hikes – up 36% in July from a year ago. In July, fuel prices were hiked by more than 10%, but that was expected, which in turn created a ripple effect on transport prices with taxi fares up 9% in a single month while e-hailing fares remained roughly the same. Please note that fuel is currently 56% more expensive than it was a year ago!!
The latest consumer inflation rate reflects the annual increase in municipality service tariffs, which are adjusted in July every year and the much contested ESKOM tariffs, which 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. In contrast, the 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%.
While this would already be sad news on its own, one needs to be wary now of the maniacs at the Monetary Policy Committee (“MPC”) of the South African Reserve Bank (“SARB”). They have shown in the past that they do not see any mandate to protect the businesses in South Africa and will most likely take this inflation rate hike to their next MPC meeting to justify another rate hike of as much as 50 Basis Points. That is bad for the struggling businesses and private households but good news for importers as in light of better market data from the US another rate hike should further strengthen the Rand.