Anticipated Positive Developments in Petrol and Food Prices in South Africa This Week
This week, economists at the Bureau for Economic Research (BER) predict encouraging news regarding consumer inflation in May, specifically relating to food and fuel prices.
According to the BER’s latest weekly outlook, the annual increase in food prices for May is expected to be moderate due to the high base of 2022. Consequently, although a 0.7% month-on-month increase in food prices is projected, the year-on-year rate is expected to decrease to around 12% from April’s close to 14%.
Similarly, a downward trend is foreseen for petrol prices, as the annual rise in the petrol component is likely to be dampened by the high base of the previous year. Overall, the BER estimates that the headline Consumer Price Index (CPI) will rise by 0.2% month-on-month, with the annual rate of increase slowing to 6.4% from April’s 6.8%.
Stats SA reported CPI at 6.8% in May, reflecting a 0.3% decrease compared to the slight unexpected increase in March.
Nedbank also expects similar figures. In its weekly economic insights report, the major bank predicts a slight decline in consumer inflation to 6.7% year-on-year from April’s 6.8%, with prices increasing by 0.5% month-on-month. The bank acknowledges, however, that significant underlying price pressures are still anticipated. These pressures include a volatile and uncertain rand, persistent power outages (load shedding), and poor growth prospects for the overall economy.
Fortunately, winter load shedding has been lower than initially projected, with stage 8 outages nowhere to be seen as the country oscillates between suspended outages and stage 3 or 4.
Revised expectations for food inflation should be welcome news for consumers who have been grappling with higher-than-average prices, as food inflation stubbornly remained at a 14-year high of 14%. However, it has shown signs of decline, settling at 13.9% in April.
Petrol prices have remained stable and are expected to continue that way, barring any significant fluctuations in the rand-to-dollar exchange rate or global oil prices.
Based on mid-month predictive data from the Central Energy Fund, Petrol 95 is expected to decrease by 4 cents per liter, while Diesel 0.005% will see no change.
The rand has also demonstrated positive performance. Nedbank highlights that the currency continued its recovery, surpassing R18.20/$ for the first time since the third week of April.
Nedbank attributes this improvement to the momentum from the previous week, along with indications that winter power outages will be less severe than initially feared, the U.S. Federal Reserve’s pause, and expectations that diplomatic efforts by President Ramaphosa and other African leaders would help alleviate geopolitical tensions.
Source: Businesstech
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