According to figures released on Wednesday, South Africa’s inflation increased to 7.1% year over year in March, continuing a trend that began in February.
South Africa’s annual inflation rate rose for the second consecutive month to 7.1% in March 2023, from 7% in the prior month, against market expectations of 6.9% and still above the upper limit of the SARB’s target range of 3%-6%. Food and non-alcoholic beverages (14% vs. 13.6% in February); transport (8.9% vs. 9.9%); miscellaneous goods and services (5.9% vs. 6.1%); and housing and utilities (4%, the same as in February) were the main drivers of overall inflation.
The annual core inflation rate, which excludes prices of food, non-alcoholic beverages, fuel, and energy, stood at a six-year high of 5.2% in March, unchanged from February and slightly above market estimates of 5.1%. On a monthly basis, consumer prices inched up by 1% in March, the most in eight months and above market forecasts of a 0.9% increase. Prices rose significantly for education (5.7% vs flat reading in February) and alcoholic beverages & tobacco (2.2% vs 0.4%), as new excise taxes for alcohol and tobacco products, came into effect in March.
The increase recorded for food and non-alcoholic beverage makes it the highest yearly increase in 14 years.
In an effort to control inflation, the South African Reserve Bank (SARB) has increased interest rates nine times in a row since November 2021.
The SARB, which aims to keep inflation between 3% and 6%, stunned observers by raising interest rates by a larger-than-expected 50 basis points at its most recent meeting in March.
In a research paper, Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, predicted that food cost increases would continue to be high in the months to come, when they would likely peak.
Senior economist at First National Bank, Koketso Mano, noted that it appeared as though power shortages were causing local food inflation to worsen.
According to data from Statistics South Africa, core inflation, which does not include prices for food, non-alcoholic beverages, fuel, and energy, was 5.2% in March compared to the previous month.
From 0.7% in February to 1.0% in March, consumer inflation increased.
In a note, Capital Economics emerging markets analyst Virág Fórizs stated that it now seemed likely that the SARB would raise interest rates by 25 basis points on May 25.