July inflation lowest in two years

Inflation fell sharply in July to 4,7%, its lowest reading since July 2021, mainly thanks to lower fuel prices.

Annual consumer inflation was 5,4% in June.

According to Statistics SA, consumer prices increased on average by 0,9% between June and July 2023, up from the monthly rise of 0,2% recorded in May and June.

Transport was the star in July, tapping the brakes on overall inflation after being a major upward driver of inflation. In 2021 and 2022, overall inflation was mainly pushed higher by transport.

A year ago, headline consumer inflation hit a 13-year high of 7,8% in July 2022, with transport contributing 44% (3,4 percentage points).

Fuel prices were largely to blame for the price increases in transport. In July 2021, the price of inland 95-octane petrol was R17,39 per litre and increased significantly to a record high of R26,74 per litre in July 2022. Inflation was 4,6% at the time.

The impact was so significant South Africa’s inflation rate would have been 5,5% instead of 7,8% in July 2022 if fuel prices were stable, according to Stats SA’s analytical series. After peaking in July 2022, fuel prices began to ease.

Inland 95-octane petrol decreased to R22,46 per litre in July and for a vehicle with a 50-litre fuel capacity, this translates to a saving of R214.

Statistics SA said the decline in fuel prices weakened the upward push of transport on consumer inflation, with the annual rate for fuel negative at -16,8% in July 2023. This dragged the transport category down into negative territory for the first time since January 2021.

This also happened in 2020 when annual transport inflation was negative from April to June and again from October to December.

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Food prices did not decline as fast as transport

Apart from transport, the prices of bread, cereals, and meat softened further. Statistics SA said although food inflation also eased, it did not happen as quickly as for transport.

The annual rate for the food and non-alcoholic beverages category was 9,9% in July, lower than June’s print of 11,0%. Annual inflation for bread and cereals slowed to 13,1% from 15,5% in June. Maize meal, an important staple, was also cheaper in July compared to June, with prices falling on average by 0,7%. Annual meat inflation also declined for a fifth consecutive month, easing to 5,1%.

Unfortunately, there were also food prices that resisted the downward trend: dairy, beverages and sugar, sweets and desserts. The annual rate for milk, eggs and cheese increased to 14,4% from 14,1% in June.

Cheese prices are increasing sharply, with large annual increases recorded for cheese spread (up 19,5%), cheddar cheese (up 19,0%) and Gouda cheese (up 16,6%). Annual inflation for hot beverages steamed to 9,0% in July from 8,7% in June, with the rate for instant coffee increasing from 10,3% to 11,5%.

If it was not bad enough for coffee drinkers to fork out more for their caffeine fix, sugar prices increased as well. White sugar costs on average 20,8% more and brown 22,8% more than a year ago. The sugar, sweets and desserts category recorded an annual inflation rate of 18,7%, up from 16,4% in June, the highest reading for this category since May 2017.

The statistics showed inflation for alcoholic beverages also picked up, with the annual rate for the category increasing to 7,8% in July from 6,9% in June. Annual wine inflation edged higher to 9,8% and beer saw its rate bubble up to 7,4%.

Increases in electricity, water and property rates also increased. Statistics SA surveys municipal tariffs every year in July and August and found the housing and utilities index increased by 2,8% between June and July.

Households are on average paying 14,5% more for electricity, while water tariffs increased by 9,6% and property rates by 2,9%. Statistics SA says a final picture will emerge in the August consumer price index when the survey is completed.

Food products became more expensive over the past year are onions (55,2%), potatoes (27,8%, cauliflower (25,6%), brown sugar (22,8%), white sugar (20,8%), pizza or pies (20,4%), soup powder (20,1%), baby milk formula *20%), rice (19,8%) and cheese spread (19,5).

Products that became more expensive over the past month from June to July, were electricity (14,5%), water supply (9,6%), cinemas, theatres and concerts (8,2%), peppers (8,1%), maize-based food drinks (7,1%), cauliflower (6,1%), pizza or pies (5%), furniture and furnishings (4,8%), frozen fish fingers (4,6%) and frozen hake (4,1%).