South Africa’s consumer inflation numbers for December 2021 surprised on the upside, with CPI coming in at 5.9% compared with 5.5% in November and an expected 5.7%, reinforcing the case for a hike in interest rates next week.
According to Statistics South Africa, this is the highest annual increase since March 2017, when the rate was 6.1%. On a month-on-month basis the CPI increased by 0.6% in December.
The number is, however, still within the inflation target band of 3% to 6%.
The rand, which opened trade at R15.50 against the US dollar, gained 0.87% to last trade at R15.38 following the release of the CPI report.
Bloomberg reports South Africans are facing another tough year, with energy, fuel and food prices likely to surge and the SA Reserve Bank and the government set to remove the stimulus that’s helped citizens cope with the damage caused by the coronavirus pandemic.
According to the StatsSA report, the main factor fuelling inflation was a 16.8% annual increase in the transport index, with the record price of petrol the main culprit. The price of inland 95-octane breached the R20-per-litre level for the first time to reach R20.29/litre last month following a surge in global oil prices and a weakening rand. Transport contributed 2.3 percentage points to the headline inflation number.
And it will get worse, with traders betting that oil at $100 is a question of when, not if amid surging demand, fading omicron fears and OPEC+’s inability to ramp up output fuelling Brent crude to jump 25% to around $88 a barrel since the end of November, reports Bloomberg.
Steep increases in the prices of food and non-alcoholic beverages contributed a percentage point to the rise in CPI, with the price of meat (1.2% month-on-month) a strong contributor. The largest price hikes recorded for beef products were for steak, which was 2.8% more expensive between November and December, and the price of stewing and ground beef, which rose 2.4% and 1.3% respectively.
The 4.2% annual increase in housing and utilities also contributed a percentage point, with miscellaneous goods and services contributing 0.7 of a percentage point.
