Inflation has dampened customers' appetite for spending
AFP

According to figures released by Statistics South Africa on Wednesday, transport costs moderated in December 2022, causing consumer price inflation in South Africa to fall marginally to its lowest level in seven months.

Following an increase to 7.4 percent in November, the consumer price index, or CPI, rose to 7.2 percent year on year in December. Also, despite the South African Reserve Bank's target range of 3 to 6 percent being exceeded by the inflation rate, the core inflation rate slightly decreased in December from 5.0 percent to 4.9 percent. This is less than the 5.1 percent gain that was predicted, according to Statistics South Africa.

Due to a decline in gasoline prices, transportation costs rose by 13.9 percent yearly, though at a slower rate than the 15.3 percent increase observed in November. Food and non-alcoholic beverage costs increased by 12.4%, while housing and utility costs rose by 4.1% over the previous year. Contrary to expectations, consumer prices, on a month-to-month basis, rose by 0.4 percent in December compared to 0.3% in November, Reuters Reported.

The most notable contribution to overall food inflation has come from bread and cereal items. While oils and fats experienced a fourth consecutive month of cooling, beef inflation dropped to 9.7% in December from 10.5% in November.

In August 2022, South Africa's inflation rate reached a record high of 7.8 percent year-on-year, primarily due to rising food costs, transportation, and electricity prices. The 2022 reading is the highest annual average rate since 2009, at the end of the global financial crisis when it was 7.1%. The average annual inflation rate in 2021 was 4.5%.

The Central Bank's Monetary Policy Committee anticipates that inflation will continue to rise until the second quarter of 2023, exceeding the upper bound of its target range.

Rate increases from the Reserve Bank are also expected to continue, albeit more gradually until it is confident that inflation will reach the midpoint of its projected horizon.

The MPC will convene for the first time this year the following week.

Meanwhile, the South African rand had been losing ground for the previous three days, but Wednesday's inflation news helped it recover. In addition, emerging market stocks increased after the previous session's 10-day surge was cut short. Reuters Reported.