Inflation has dampened customers' appetite for spending
AFP

South Africa's statistics agency StatsSA said on Wednesday that the country's annual consumer price inflation (CPI) decreased from 7.2% in December 2022 to 6.9% in January 2023.

This was the third month in a row that the CPI showed a decline.

As anticipated, food costs were a major contributor to January's inflation as food and non-alcoholic beverages rose 13.4% year-on-year and contributed 2.3 percentage points to the annual CPI rate.

"The main contributors to the annual inflation rate of 6.9% were food and non-alcoholic beverages, housing and utilities, and transport," StatsSA said in a statement.

Vegetable prices, in particular, rose significantly by 5.2% between December and January. Bread and cereal prices increased by 22.1% year on year in January, while meat prices increased by 11.2%.

Housing and utilities grew by 4.1% year-on-year and contributed 1.0 percentage points throughout the period. The transportation sector grew by 11.1% on a yearly basis and contributed 1.6 percentage points.

Onions have witnessed the highest surge in price, approximately 50% higher than in January 2022. Furthermore, month-on-month, the highest price increase, at 15.1% inflation, was seen in potatoes, Business Tech reported.

The primary driver of the decline in the headline rate, as per the group, was a significant drop in fuel prices. The fuel price index fell 10.5% from December to January, lowering its annual rate from 22.8% to 13.1%.

The 4.8% annual growth in other products and services, which accounted for 0.7 of the percentage point, was positive.

The annual inflation rate for goods was 9.5% in January, down from 10.1% in December, and the annual inflation rate for services stayed the same at 4.3%.

Following a 13-year high of 7.8% year over year in annual inflation in July of last year, the most recent inflation numbers offer additional proof that price pressures are lessening in Africa's largest industrialized country.

However, as per the South African Reserve Bank's standards, the inflation rate is still too high. The bank predicts that inflation will average 5.4% in 2023, down from 6.9% last year, with a target rate range of 3% to 6%.

As a side note, the South African Reserve Bank increased its repo rate on Jan. 26 from 7% to 7.25% to control inflation. Amid growing electricity shortages, the central bank has also cut its predictions for this year's GDP growth to just 0.3%.