OK folks, this is a reasonably busy day, but I wanted to comment on the recently released consumer food price inflation data for February 2023 by Statistics South Africa. I will write something in-depth at a later stage.
Here is a brief synopsis and my views.
South Africa’s consumer food price inflation accelerated mildly to 14% y/y in February 2023 from 13,8% in the previous month. The food product prices that increased notably were meat; milk, eggs and cheese; vegetable; and sugar, sweets and desserts.
These elevated levels of South Africa’s consumer food price inflation are unsurprising and illustrate an environment where there are still tail-end effects of generally higher agricultural commodity prices.
Moreover, the results of load-shedding, which intensified in January 2023, will likely underpin prices for a few months and dissipate as the new measures taken by the Finance Minister and the Department of Agriculture, Land Reform, and Rural Development starts to gain momentum. The measures include the diesel rebate and load curtailment possibilities, amongst others. These are mainly at the production level and do not include retailers.
Positively, the agricultural commodity price trend has changed globally, now softening. This will soon be a reality in South Africa.
Moreover, the meat prices, which underpinned the uptick in February, could also soften, and we see that already in red meat prices. All this will be positive. Also, sharp vegetable price increases were temporary and influenced by weather conditions.
Taking all these aspects together, we should see South Africa’s consumer food price inflation softening from around May into the year’s second half.
Overall, South Africa’s annual consumer food price inflation should average around 7% (from 9,5% in 2022), assuming notable decelerations in bread, cereals, meat, oils, fats, and fruit. This assumes notable deceleration in the year’s second half of the year, and the base effects from 2022 elevated inflation levels.
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