Annual consumer inflation cooled in September for the second consecutive month, edging down from the 13-year high seen in July.
According to Statistics South Africa, inflation fell to 7.5% year-on-year in September, down only slightly from the August print (7.6%). The downward trend gives further credence to the view that inflation peaked in July, when the annual rate hit 7.8%.
Lower inflation comes amid a decline in fuel prices, as well as signs that food costs are easing.
Fuel prices fell by 6.4% between August and September, according to the data. This slowed the annual rate to 34.1%, which is down from the high of 56.2% reported in July.
Annual food and non-alcoholic beverage inflation continued to accelerate, to 11.9% from 11.3% in August. But the monthly price change was softer in September compared with the 1.8% monthly rise recorded in August.
There were notable increases in the prices of rentals, apparel and personal care products.
The annual rate for actual rentals in September was 2.8%, the highest reading since February 2020. Clothing and footwear prices also increased by 2.8% year-on-year, marking the highest rise since August 2017. Personal care products registered an annual rate of 8.3%, the highest since December 2009.
Inflation looks as if it will be more stubborn than previously expected as crude oil prices resist the downward pull of recession fears.
In a research note, Investec chief economist Annabel Bishop said inflation is expected to trend downwards in October and November. But any declines in the latter month will probably be dulled by higher fuel prices.
Earlier this week, the Automobile Association of South Africa warned that, after a series of declines, the petrol price looks to increase in November as a result of higher international oil prices and the weaker rand.
Crude futures edged above $84 a barrel on Wednesday, although they were quite a bit lower than the levels seen two weeks ago when Opec+ signalled plans to cut oil production.
The oil cartel’s efforts to buoy prices have come up against recession fears as well as a planned release of emergency oil reserves by the United States. But oil prices are higher than they were a month ago.
According to the Automobile Association, data shows petrol is expected to increase between 41 and 51 cents a litre in November. Diesel will increase substantially by about R1.60 a litre.
“The impact of such an increase on ordinary citizens will be significant,” the association said, later adding that — although the figures may change — it does not expect a reversal in the petrol price come November.
The fuel price rise in November will add upwards pressure to inflation. A slow fall in inflation, or stickiness, is pervading both domestically and globally, Bishop said in her research note.
With inflation now expected to remain higher for longer, central banks will probably stay on the path of higher interest rates. More rate hikes will add to a deterioration of the global economic outlook, further increasing uncertainty and thus suppressing other commodity prices, Bishop said.