Paul Makube
Headline inflation continued to decelerate after clocking 5.1% y/y in June to a 39-month low of 4.6% y/y in July 2024. Monthly, headline inflation edged 0.4% higher m/m with price pressures from electricity, which contributed 0.4ppts to the monthly outcome, and core inflation.
Food inflation continued to trend on the downside for the eighth consecutive month to reach a 55-month low of 3.9% in July 2024 as declines for most of the food subcategories more than offset gains in prices for the “bread and cereals” and meat products. Monthly food inflation fell to -0.1% m/m with price declines across most products, except fish.
The oils and fats categories extended their trend in negative territory for the fifteenth consecutive month at ‑0.1% y/y although monthly it edged 0.5% m/m in July 2024 from -0.8% m/m in June. The fruit and vegetable categories continued to surprise on the downside in July as recent weather-related damages to crops are yet to filter through. Monthly fruit inflation decreased for the sixth consecutive month to -1.6% m/m and -1.7% m/m respectively in July. Annual vegetable inflation slowed further to 3.4% y/y while fruit decelerated by 2.1ppts from last month to 2% y/y. Nonetheless, the impact of black frost that decimated crops in Limpopo and strong winds and flooding conditions in parts of the Eastern Cape and Western Cape provinces respectively remains a concern as supplies might tighten in the medium term.
Annual bread and cereals inflation edged up by 0.2 ppt from June to 5.6% y/y in July 2024 which is a gradual pass through from the drought-induced price increases in the grain complex over the past few months. Tight regional supplies of maize particularly the white category poses near term upside risk for prices as exports surged on high demand. South Africa is however still well supplied due to the good carryover stock from the previous season, estimated at 1.36 million tons by April 30, 2025.
This trend is likely to sustain in the short term. Nonetheless, the combination of the improved weather outlook with the La Nina weather pattern starting to take hold will limit further upside for grain prices in the season ahead and consequently the “bread and cereals” inflation outcomes. Further downside risks include subdued global inflation, a stable to stronger rand and lower international crude oil prices.
Paul Makube, Senior Agricultural Economist, FNB Commercia. He writes in his personal capacity.
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