Even with lower consumer inflation consumers’ disposable incomes remain constrained.
The 65c/l drop in the petrol price helped pull back the consumer price inflation to 5.1% in December from, 5.5% in November last year.
This leaves the overall inflation for last year at 6%, higher than what the Reserve Bank would like to see before cutting interest rates.
A further 76c/l reduction in this month – barring an extraordinary event in the last days of the first month of 2024 – is likely to further edge the inflation rate closer to the bank’s midpoint of 4.5%.
READ: Hefty fuel price cuts confirmed for Wednesday to bring relief to motorists
Meanwhile, core inflation which strips off the volatile energy and food prices remained at 4.5%, signalling that the underlying inflation was at the midpoint, analysts said.
The Reserve Bank’s monetary policy committee (MPC) has forecast consumer price index to only moderate to the mid-point of its 3% to 6% target range in 2025.
Investec chief economist Annabel Bishop said today’s figure is unlikely to change the MPC’s 2024 view on inflation.
The MPC meets tomorrow to make its interest rate decision, and will likely continue to have a hawkish tone, warning of inflation risks, although on balance is expected to keep interest rates unchanged.
The drop in inflation means little to hard pressed consumers, who are still battling to service their much increased mortgage repayments and put food on the table, as interest rates remain elevated and food prices high.
Consumer Sabelo Mangena said his mortgage repayments have gone up more than R1 000 since the MPC started hiking interest rates.
“To pay for that, food increases, utilities, petrol and other things like school fees and stationery means every month I have a shortfall, I don’t even budget anymore because there’s no difference. Its really tough because I didn’t get an increase at work but everything else keeps going up.”
Food inflation remains high at 8.5%, this together with inflation for health services at 6.5% and restaurants and hotels at 7%, which ended the year above 6%, according to Stats SA which released the figures on Wednesday.
Prices in the food basket have negatively affected many households with some being forced to do with cheaper options for basics, including less expansive meats like poultry. But even poultry prices were high because of last year’s Avian influenza which saw prices like eggs skyrocket.
READ: No reprieve for consumers, as interest rates are expected to remain unchanged for now
Eggs saw a 38% increase in the 12 months to December, while the milk and cheese price index was 4.5% in the 12 months to December, higher than November’s rate of 13.9%.
READ: Eggless bacon and eggs breakfasts are on the horizon, as bird flu threatens supply
RMB chief economist Isaah Mhlanga said the outcome of the first MPC meeting of the year is usually muted ahead of the budget in February and the state of the nation address.
This time, however, the MPC may face questions on beefing up the now much smaller committee.
This MPC will also face questions on the appointment of former deputy governor Kuben Naidoo’s replacement given that he is now in his cooling-off period and no longer participating in MPC meetings.
“It is more likely that we will have a four-member MPC — the governor, two deputies and the governor’s advisor — at this week’s meeting,” Mhlanga said.
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