Inflation rose sharply to an annual rate of 5.4% in September, marking a firm reversal of the downward trend in the second quarter of 2023.
Data released on Wednesday showed that inflation rose significantly compared to August, when the reading stood at 4.8%. According to Statistics South Africa, the increase was driven by food price inflation which — after cooling for the past five months — ticked up slightly to 8.1%, from 8% in August.
The rise in inflation was expected, given that fuel prices were up significantly in the month. Moreover, some parts of the country had already experienced surging egg prices in the wake of the avian flu outbreak.
Tuesday’s data showed that egg prices registered a monthly increase of 0.3% after a decline of 0.4% in August.
“Prices for poultry-related products deserve a close watch in the coming months to gauge the impact of the avian flu outbreak,” StatsSA said in a note accompanying the data.
In its Monetary Policy Review, released on Tuesday, the South African Reserve Bank noted that — in line with the resurgence in crude prices — local headline inflation is expected to trend broadly sideways into early 2024. It is forecast to average 5.9% in 2023, before declining to 5.1% in 2024.
The Reserve Bank has hiked borrowing costs by a cumulative 475 basis points since November 2021. The repo rate is currently in restrictive territory at 8.25%, with Reserve Bank governor Lesetja Kganyago recently underlining that the central bank’s fight against inflation is not yet over.
Commenting on September’s data, Investec chief economist Annabel Bishop noted that the rand, fuel prices and El Niño posed a risk to inflation in the months ahead.
That said, Investec does not anticipate further interest rate hikes in South Africa this year or next, with the first cut expected in July 2024.