Statistic South Africa’s latest update on the country’s headline inflation accelerated to 7% y/y in February 2023 underpinned food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services.
“This follows a slowdown to 6.9% y/y in January 2023 from 7.4% and 7.2% respectively in November and December 2022. In the food category, prices jumped to the record high of 14% y/y since March 2009. However, the monthly food CPI slowed from 2% m/m in January to 0.9% m/m in February 2023,” explains Paul Makube, Senior Agricultural Economist, FNB Commercial.
“In the food basket, the bread and cereals category posted the highest increase of 20.5% y/y in February 2023 although slightly slower than the 21.8% pace for January. This again reflects price gains of raw commodities in 2022 that manufactures are still carrying, and further exacerbated by the cost pressures emanating from load shedding.
“Moreover, this category’s weight is significant in the food basket at 21%. Nonetheless, we have seen some moderation in grain prices relative to 2022 levels and hopefully this will be reflected in the next few months given the lag in the pass-through to the consumer prices.”
Makube adds that meat, with a higher weight of 35% in the food basket saw increased by 11.4% y/y in February 2023 but decelerated to 0.2% m/m after jumping 2.6% m/m in January.
“Unrelenting cost pressures emanating from elevated feed costs and load shedding were the biggest drivers of higher meat inflation as producers especially of intensive production systems were left with no choice but to recover costs,” he notes.
“Other sizeable increases included oils and fats, vegetables, and other foods with 16.7%, 15.7%, and 15.0% y/y respectively. Gains in oils and fats reflects the elevated trend in domestic oilseed crops prices relative to last year.
“However, monthly prices on both the domestic and international markets trended on the downside in the February which has the potential to limit further upside in consumer prices in the months ahead.
“Furthermore, global food inflation remains on the downside as per the United Nations Food and Agriculture Organization’s February update that showed a fourth consecutive decrease to -8.1% y/y.
“Fortunately, the domestic summer crop season is expected to end on a high note with a good harvest given the excellent seasonal conditions which bodes well for food inflation in the months ahead.”