Consumer price inflation fell to 4.6% in July from 4.9% in June after a high of 5.2% in May, according to Stats SA. This is well within the Monetary Policy Committee’s inflation target range of between 3% and 6% per year, and only fractionally above its preference of a midpoint of the range at 4.5% per year.
According to the July CPI figures, housing and utilities inflation is at a reasonable 3.8%. However, electricity – a sub-component of housing and utilities – has seen a 6.2% year-on-year change which is at the upper limit of the target range. The year-on-year change for June was 13%.Regulations to allow entities to self-generate up to 100MW is likely to see the removal of “good payers” from Eskom’s accounts, which will put further pressure on the utility provider.
Inflation from food and non-alcoholic beverages has moderated slightly to 6.7% after a high of 7% in June, the highest rate since June 2017. Food inflation has been rising steadily since the last quarter of 2020 with food inflation the primary driver of higher inflation figures in April, coming in at 5.2%. The rising cost of agricultural inputs such as energy, fertiliser and feed all have an impact on food inflation.
A source with the potential to provide an inflationary surprise is the public sector wage bill. The 1.5% 2021 increase may appear to be a negotiated limited increase but once the monthly gratuity has been factored in, the real increase is more like 4.9%. This is likely to have an impact in terms of increased spending.
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