October CPI Hits New Low
Statistics South Africa released its latest consumer Inflation figures today (20 Nov) for the month of October, and indicated that South Africa’s consumer price inflation (CPI), eased further in October to the lowest level in more than four years.
The CPI figure of 2,8% was a further reduction of 100 points from Septembers low of 3,8%, and August’s figure of 4,4%, with the last period that inflation had been seen at this level, being in June 2020.
Fuel Price Drop Major Factor
The main driver of the drop in inflation was the reduction in the fuel prices that had been sitting on high levels, and increasing for the preceding year, but had dropped for two months in a row going into the October period measured.
This was the lowest inflation rate since June 2020, when CPI was measured at 2.2 percent.
The core inflation, which excludes prices of non-alcoholic beverages, fuels, and energy, softened to 3.9 percent from 4.1 percent.
The Details:
Transport charges were 5.3 percent lower compared to last year as fuel prices plunged by 14.8 percent. The annual price growth in food and non-alcoholic beverages eased to 3.6 percent from 4.7 percent, the lowest since November 2019. Meanwhile, housing and utility costs grew at a steady pace of 4.8 percent
Rate Cut Relief for Consumers Now Likely
The CPI rate is now well below the South African Reserve Bank’s 3%-6% target range, providing a strong possibility of further interest rate cuts by the Central Bank may be on the cards in December, with some analysts indicating a 1% cut is likely.
The Inflationary factors in the economy are again highlighted as not being consumer demand related, but have rather been driven by costs such as the fuel levies and other related taxes.
Inflation on energy and water prices have being increased regularly by the government, with October seeing a 4,8% increase in utility inflation again.
Lower interest rates will help consumers and small businesses, who have been hurt by raised interest rates for some time, and the reduction in interest rates will finally bring some relief to struggling consumers and hopefully start boosting some economic growth.
