Consumers’ spending power remains under pressure as inflation continues to rise locally and in the global economy. Figures released by Statistics South Africa showed that the annual consumer price inflation rate increased from 5.7% in February to 5.9% in March 2022.
Analysts say inflation is expected to continue its upwards trajectory due to supply-side constraints on the back of geopolitical tensions in Eastern Europe.
The main contribution to the higher inflation rate came from food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services.
An Economist at Econometrix, Laura Campbell says South Africa will not be spared from the effects of the Ukraine-Russia war through higher Brent Crude oil prices and rising food inflation.
“The headline CPI rose in March. It came in slightly below expectations, but the fact that it increased reflects the effects already of the Russia-Ukraine war. Oil prices rose sharply in February on expectations that Russia would indeed invade Ukraine and this pushed fuel prices up sharply and the fuel inflation rate up sharply. We’re likely to see the headline consumer price inflation rate breaching the upper end on the inflation target in the coming months.”
Rising inflation is not a problem unique to South Africa:
CPI to average 5.8%
The Reserve Bank expects headline consumer price inflation to average 5.8% this year underpinned by rising fuel prices and elevated food inflation. A Chief Economist at Efficient Group Dawie Roodt says an interest rate hike is definitely on the cards.
“Inflation is likely to move up to above 6% in the next couple of months and that is the global phenomenon with inflationary pressures building up. In these kinds of circumstances, there’s very little that central banks can do but increase interest rates, and the South African central bank already indicated that they’ll keep in tapering monetary policy, so I think it’s pretty much a given now that the Reserve Bank will again increase interest rates next month.”
The annual consumer price inflation remains within the Reserve Bank’s 3 to 6% target band, however, analysts say inflation is expected to break through 6% upper in the near future.
