Advertise with

After a reprieve at the end of 2019 and in January, fuel prices have started to rise again.
After a reprieve at the end of 2019 and in January, fuel prices have started to rise again.

Inflation accelerates in March after painful fuel price increase


By Sunita Menon - Apr 17th, 13:29

Another fuel price hike in March led to inflation hitting the midpoint of the Reserve Bank’s 3%-6% target range.

Inflation, as measured by the annual change in the consumer price index (CPI), accelerated to 4.5% in March from February’s 4.1%. This was slightly below a poll by Trading Economics, which expected inflation to rise to 4.6%.

The rise in inflation was based on a 6.4% increase in alcoholic beverages and tobacco; a 4.5% increase in housing and utilities; and a 6.4% increase in transport. Although overall food inflation was 2.3% in January, Stats SA said vegetable prices showed an alarming annual inflation rate of 9.4% and fruit 7.6%.

After a reprieve at the end of 2019 and in January, fuel prices rose again in February. March saw a steep increase of 74c/l as a result of an increase in oil prices. The fuel component increased by 8.8% compared with the same period in 2018 and by 5.1% compared with February.

The rising price of Brent oil and a weaker exchange rate will lead to further fuel price increases in the coming months, NKC economist Jacques Nel said. “Higher fuel prices over the short term, as well as higher electricity and food prices towards mid-year, are likely to drive consumer inflation gradually higher.”

Motorists got their steepest increase at the pump in four years in April while a hike in government levies also took effect at the beginning of the month. Despite this, inflation remains under-control at both a headline as well as a core level, Stanlib chief economist Kevin Lings said.

The Reserve Bank expects inflation to average 4.8% this year, slightly above 4.5%.

“Consumer inflation probably reached its trough in January and will gradually increase in the next few months. However, it will remain below 5% for most of the year, contained by weak demand conditions and moderate food price increases,” Nedbank economist Busisiwe Radebe said.

The annual change in CPI is the key measure used by the Reserve Bank’s monetary policy committee to set interest rates. The committee is scheduled to announce its next decision on May 23.

The Bank has made it clear that it would prefer inflation expectations at the 4.5% mark. Analysts say the relatively contained inflation outlook and the weak economy will convince the Reserve Bank to keep interest rates unchanged.

“Although the SA economy remains extremely weak, which argues for a possible interest rate cut, the current upward drift in SA inflation, supports the view that the Reserve Bank can afford to leave interest rates unchanged during 2019,” Lings said.

Economic growth will likely be lower because of power cuts earlier this year, and demand pressure on prices remains low. Said Radebe, this will convince the committee to only resume a tightening cycle in 2020 on expectations of higher inflation.Business Live 

Related News

4 reasons to be hopeful about South Africa’s economy
12/09/2019 - 14:40
Markets responded positively to South Africa’s economic growth rebounding in the second quarter, up 3.1%, and 0.9% for the year to June 2019.

Smarter mobility key to a sustainable South Africa
11/09/2019 - 13:19
The World Economic Forum has revealed that by 2050, 70% of the world’s population will be living and operating in urban areas. Considering the resultant congestion and air pollution, which are already challenges requiring mitigation in 2019, mobility and energy should be top of mind for those making the shift towards cities of the future.

Manufacturing production shrinks for second month in July
11/09/2019 - 13:01
Manufacturing production recorded its second consecutive contraction in July, in line with analysts’ expectations.

Eskom: The largest threat to the stability of the SA economy
10/09/2019 - 09:45
On Tuesday 23 July, South African Finance Minister Tito Mboweni tabled a bill before the National Assembly which would see national state-owned power utility Eskom benefit from an allocation of R59 billion over the next three years.

African continental free-trade deal has a long way to go
09/09/2019 - 14:50
The African continental free-trade agreement (AfCFTA) is facing several challenges and it could be decades before there is a common market in which tariffs are largely abolished.