Despite an unexpected increase in consumer price inflation for October,

Wandile Sihlobo, the chief economist of the Agricultural Business Chamber (Agbiz), expressed optimism.

He stated that, overall, they believe South Africa’s consumer food price inflation will follow a moderating path in the coming year.

According to Statistics South Africa (Stats SA), the annual headline Consumer Price Index (CPI) rose more than anticipated in October, reaching 5.9%, up from 5.4% in September and surpassing the Bloomberg market consensus of 5.6%.

The inflation rate for food and non-alcoholic beverages (NAB) experienced its second consecutive monthly acceleration, climbing to 8.7% in October from 8.1% in September and 8.0% in August. This 1.5% monthly increase marked the highest since January this year (1.8%).

Sihlobo attributed this rise to specific product prices, particularly milk, eggs, cheese, fruit, and vegetables. He emphasized that the recent price hikes are likely temporary reactions to brief supply constraints in the past few months.

Read More on the Avian Flu that caused the Prices to Soar

Wandile Sihlobo stated that, overall, they believe South Africa’s consumer food price inflation will follow a moderating path in the coming year.

However, Nkhensani Mashimbyi, an agricultural economist at Absa Agribusiness, cautioned that South African consumers’ disposable income would continue to face pressure, limiting increases in food prices, especially red meat.

Mashimbyi highlighted that stubborn inflation aligns with the central bank’s hawkish stance on maintaining higher interest rates for an extended period. This, in turn, would result in elevated debt servicing costs expected to persist into the next year.

“Vegetable inflation rose from 15.3% in September to 23.6% in October. This rise was driven by firmer prices across multiple vegetable products. For potatoes specifically, lower supply, due to lower plantings and climatic issues, have supported year-on-year and month-on-month price increases in October. In contrast to this, meat price growth remained limited due to constrained consumer income,” Mashimbyi said.

Thabile Nkunjana, the senior economist and acting manager at the Trade Research Unit of the Markets and Economic Research Division within the National Agricultural Marketing Council (Namc), pointed out that familiar products contributed to the slight increase in October compared to September.

“These included vegetables, which were up 7.1%, headed by potatoes and onions, fruit, up 5.8% month on month, and animal product mostly eggs, milk, and cheese. The avian influenza was the primary cause of egg price increases during October, although numerous actions are being implemented to mitigate the issues both by government and the industry.

“Potato prices were impacted by limited availability following a fall in production and poorer yields due to irrigation issues caused by power outages,” Nkunjana said.

The key challenge for vegetable products is supply, and an increased supply is expected to significantly reduce current costs. Potato availability should improve, assisting consumers through the end of the year, according to the marketing council.

Nkunjana mentioned that more eggs were entering the country as methods of expanding local supply were explored. This followed the avian influenza outbreak in South Africa, which led to the culling of millions of layers, causing a limited egg supply.

Namc noted positive developments, stating that grain products, such as bread and maize, have not seen significant increases in recent months. However, concerns were raised about supply chains due to increased geopolitical tensions and potential spillover from crises in various regions.

“Food prices will likely normalize in the early months of 2024, but prices in the coming weeks may be somewhat similar to current levels due to demand around this time of year, and this should vary by product due to the uniqueness of factors that can affect each product,” Nkunjana concluded.

Source:IOL