Podcast Summary
CPI inflation trend: Economist predicts CPI inflation to decline rapidly after a slight increase in July, potentially reaching below 5% by September and slightly above 4% by October.
While the latest Consumer Price Index (CPI) print for June came in at 5.1%, down from 5.2% the previous month, economist Dr. Alna Moeman from Standard Bank believes it may still be somewhat sticky in the next month or two but could decline rapidly thereafter. The current high inflation rate is partly due to last year's trends and the year-on-year comparison. Food price inflation, which has fallen sharply, is a positive sign, but historically, deflation in food prices is not common. Dr. Moeman predicts that by September, inflation could be below 5%, and by October, it could be slightly above 4%, making it a welcome trend towards the Reserve Bank's 3-6% target range.
Food price inflation: Despite variations in food categories, overall food price inflation is projected to remain contained with potential decreases, while some fruits, vegetables, grains, and cereals have seen increases due to global prices, exchange rates, and local weather conditions. Rental inflation and hot beverages are also factors to consider.
While there are significant variations in food price inflation across different categories, overall food price pressure is expected to remain contained. Fruit and vegetable prices have even declined in some areas, while prices for certain grains and cereals have seen steep increases. Global prices and exchange rates play a larger role in the inflation of some food types, while local weather conditions impact others. The positive news is that food inflation is projected to remain relatively low, potentially even decreasing slightly. Additionally, rental inflation, which is surveyed quarterly, indicates that there is no significant demand pressure for inflation. In other news, the discussion touched on the topic of hot beverages, which see increased consumption during winter months. The data shows expected price increases for items like tea and coffee. The variations in food price inflation are influenced by a range of factors, and overall, the outlook remains that food price pressure will remain subdued.
South African food inflation, weather conditions: El Nino's impact on coffee prices is causing high food inflation in South Africa, but above-average rainfall the past 3 years and forecasted shift to La Nina conditions could ease pressures
South Africa is currently experiencing high food inflation due to specific weather conditions, particularly the impact of El Nino on coffee prices. However, the country's above-average rainfall over the past three years has mitigated the usual price increases associated with El Nino. Looking ahead, the forecast for the coming season suggests a shift to La Nina conditions, which are typically beneficial for South Africa's agricultural sector and could result in lower food inflation. Another notable point is the weakness in demand for new vehicles, which is contributing to high prices in this sector. These trends align with reports from the automotive industry. Overall, while there are risks, the current and forecasted weather conditions provide some relief from the usual inflationary pressures in the agricultural sector.
Currency Stability: Currency stability has helped contain inflation in vehicle prices, with the currency forecasted to appreciate moderately, providing further relief
The stability of the currency over the last year has helped to contain inflation in vehicle prices. Despite some weaker and stronger spikes, the currency has generally remained stable, which means it isn't adding any inflation pressure. Looking ahead, there is a forecast for the currency to appreciate moderately, providing further relief from an inflation perspective. This is a favorable factor that is being focused on, and it is expected that the currency will range from 15 to 18 against the dollar. Overall, the stability of the currency has been a key factor in keeping inflation in vehicle prices relatively low.