Consumer price inflation in South Africa continued its upward trajectory. Figures released by Statistics South Africa show that annual inflation rose to 7.8% in July 2022 from 7.4% in June 2022. The Consumer Price Index rose 1.5% in July 2022.
Inflation accelerated to a record high, hitting a 13-year high of 7.8% in July 2022. That was better than market expectations, which had predicted growth of 8%.
Stats SA says the acceleration in inflation is driven by food and transport costs, which rose 25% year-on-year and contributed 3.4% points to the COI basket.
Nedbank economist Nicky Weimar, who previously spoke at the Economist of the Year event, says accelerating inflation will hold back economic growth.
“So overall, when we look at GDP, we expect growth to be around 1.7% this year, and next year we really expect things to slow down significantly with inflation accelerating this year. The increase in interest rates is gradually starting to put pressure on consumers and has probably led to a slowdown in growth. But at the moment we do not see a dramatic collapse of South Africa; we don’t see a recession, Weimar says.
The data indicate inflationary pressure from food and soft drinks, housing and utilities. Food and non-alcoholic beverages grew by 9.7% year-on-year and contributed 1.7% points to the total annual CPI. FNB senior economist Kaketsu Mano says inflation is likely to remain above 6 percent for the rest of this year.
“Electricity prices are up 7.4% from last month and along with other utility changes and fuel price increases; this explains the increase in administrative costs to 19 percent in July. Fuel price pressures have eased since July, with petrol prices being cut by more than one rand per liter in early August, and 22 days into the month the over-recovery was two rand per liter, suggesting another hike is possible in September decline,” says Mano.
Meanwhile, the Competition Commission released its major food pricing monitor report this week and highlighted the impact of high prices in the sunflower and oil value chain on consumers and inflation.
“This creates the risk of opportunistic price increases above cost increases during periods of inflation. It also highlights that the discounts have not been passed on to the consumer in terms of pricing. From January 2022 to June 2022, there is also a six percent increase in margarine prices,” says Competition Commission spokesperson Sipho Ngweme.