Transport costs drive SA’s consumer inflation to highest level since March 2017

Transport costs have driven consumer inflation to highest level since March 2017 in November, with the annual change in the consumer price index (CPI) at 5.5%, up from 5.0% in October and September.

Four and a half years ago, in March 2017, the inflation rate was 6.1%.

According to Statistics SA, the transport category is still the major factor behind inflation, with an annual increase of 15.0% in November, making it the only major group in the inflation basket with an annual rate above the 6.0% upper limit of the South African Reserve Bank’s monetary policy target range.

It was also the only contributor to the monthly increase in the CPI and the largest factor driving the annual change in the index, contributing 2.1 percentage points to the 5.5% annual inflation rate. Fuel prices increased by 7.1% between October and November, taking the annual rate to 34.5%.

Prof. Jannie Rossouw from the Wits Business School says the increase in the consumer inflation rate shows the influence of the high fuel price and that the South African Reserve Bank was in fact correct when it hiked the repo rate by 25 basis points in November.

“The Monetary Policy Committee will have to take on the inflation expectations if it wants to keep consumer inflation below 6%,” he said.

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In November this year, the price of inland 95-octane petrol was R19,54 per litre compared to R14,59 in November 2020, while the diesel index increased by 35.1% over the same period. In November this year, diesel cost R18,75 per litre compared to R13,89 per litre in November last year.

The following chart shows the impact of fuel prices, with the CPI excluding fuel line showing what overall inflation would be if the influence of fuel was removed. Times when headline CPI does not closely follow the CPI excluding fuel indicate the noticeable impact of changing fuel prices on overall inflation.

During 2021, headline inflation was mostly higher than the CPI excluding fuel, indicating the impact of rapidly rising fuel prices. In November, the annual change in the CPI excluding fuel index was 4.2%, lower than the headline rate of 5.5%.

The increase in the fuel price also affects public transport tariffs which increased by 1.7% in November compared to October, with an annual increase of 8.3%. Vehicles are also on average 5.6% more expensive than in November 2020.

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Food inflation in November

Food inflation slowed in November, with the prices of food and non-alcoholic beverages recording a monthly increase of 0.1% and an annual increase of 5.5%, the lowest in 9 months since February when the rate was 5.2%.

Bread and cereal products recorded above average price increases of 0.5% between October and November, with white bread prices increasing by 1.2% and brown bread by 1.4%. Meat inflation also slowed for the third consecutive month, recording an annual rise of 8.5%, down from 10.7% in August 2021.

The largest annual increases in November were for chicken and beef products, with IQF chicken portions costing 13,7% more, chicken giblets 7.7% more, beef offal 14.6% more and beef mince costing 5.1% more.

Oils and fats were also driving higher food inflation over the past 12 months with a year-on-year increase of 21.0% in November, slightly more than the 20.9% recorded in October. “Other” food, including condiments, spices and baby food, has seen a steady increase in its annual rate to reach 6.1% in November from a low of 1.5% in February this year.

Specific products showing large annual increases are soup powder (7.0%), spices (7.4%), salt (9.8%), mayonnaise (13.7%) and vinegar (9.7%).