The financial situation for the South African consumer has become dire following the recent spike in inflation and the subsequent aggressive hike in interest rates by the SARB with more in the forecasts for the months ahead, says Paul Makube, Senior Agriculture Economist, FNB Business.
Makube said that a combination of runaway inflation, tightening policy cycle by major global central banks, and uncertainty over the Russia Ukraine war with its ramifications for commodity prices and economic growth forced the SARB’s hand to hike rates.
“Effective from the 22nd of July, the repurchase rate increased by 75 basis points to 5.5% per year.”
Makube said that on the inflation front, headline inflation for June 2022 jumped 7.4% year-on-year (y/y) from 6.5% in May with food and non-alcoholic beverages subindex being one of the major contributors.
“Food and non-alcoholic beverages inflation quickened to 8.6% y/y in June from 7.6% y/y in May. Food alone posted a monthly increase of 1.3% month-on-month (m/m) and further jumped to a new record high since FEB 2017 at 9% y/y largely on the back of spill over price pressures from the global market,” he said.
In the animal protein category, said Makube, the meat CPI advanced marginally by 0.9% m/m and reached its highest level in nine months at 9.5% y/y.
“The increase in meat inflation was underpinned by a combination of resilient demand and below trend livestock slaughter. Record high cost of inputs particularly from the higher grain and oilseed prices that are major ingredients in livestock feed forced the upside in prices.
“Again, the Foot-and-Mouth Disease (FMD) outbreak failed to make a significant dent on prices as they remain elevated relative to last year.
“With the onset of Spring just a month away, it appears the consumers face an expensive braai season should the current price trajectory be sustained in the near term.”