Headline inflation for May 2024 came in steady at 5.2% year-over-year (y/y) and was in line with market expectations. Monthly, headline decelerated for the third consecutive month to 0.2% month-over-month (m/m) underpinned by gains in core categories with a 0.1 percentage point (ppt) contribution, and food and fuel with 01ppt.
Senior Agricultural Economist FNB Commercial Paul Makube says that however, food inflation was flat m/m and decelerated for the sixth consecutive month to reach the lowest level in forty-six months at 4.3% y/y in May from 4.4% y/y in April.
Except for the meat, fish, fruit, and vegetables which posted gains, most food subcategories decelerated with oils and fats extending their trend in negative territory for the thirteenth consecutive month.
Makube explains that a combination of uptick in demand and supply contraction weighed heavily on vegetable prices which saw an annual increase of 7.6% y/y in May from 7.4% previously but decelerating to 0.3% m/m relative to 3.6% in April.
The situation in the fruit category, he says, was different as prices weakened under pressure from a rebound in supplies.
“Consequently, monthly fruit inflation fell sharply by 6.6% m/m thus remaining in a negative trend for the fourth consecutive month in 2024. However, fruit inflation still jumped by 1.5ppt from April to 6% y/y in May 2024,” says Makube.
In the vegetable category, Makube says big-ticket vegetable items such as tomatoes saw a monthly upswing of 10.4% m/m in prices at R35.75/kg which was up by a whopping 19.9% y/y while potatoes saw a 2.1% m/m decrease in prices at R21.01/kg, they were still sharply higher by 20.3% y/y. Onions and carrots saw monthly gains of 2.4% and 5.3% m/m but declined by 4.2% and 0.1% y/y respectively at R24.36/kg and R17.34/kg.
“Our further analysis of the fruit inflation data shows a sharp decrease across most commodities with oranges leading the pack on seasonal upswing in supplies at R24.36/kg which is down by 13.5% m/m but still sharply higher by 21.2% y/y. Bananas and avocados followed with decreases of 11.9% and 8.4% m/m respectively at R18.03/kg and R10.54 each,” says the economist.
At the above levels, bananas were down by 1.5% y/y in May from a 7% y/y increase in April, while avocados decelerated sharply to 6.7% y/y from 13.5% y/y previously.
“Our analysis of weekly price trends on domestic fresh produce markets shows weakness across the vegetable complex while fruits ended mixed during midmonth. Carrots posted the biggest weekly decline of 18% (-R0.92/kg) w/w but still up by the same margin on last year at R4.16/kg due to the subdued demand (table 1). Average carrot prices for the first three weeks of June 2024 were down by 19.7% (-R1.25/kg) m/m but still up by 26.7% (+R1.07/kg) y/y at R5.09/kg.
“Although weekly tomato prices rebounded strongly and increased by 8.3% (+R0.56/kg) w/w and 20.5% (+R1.24/kg) y/y at R7.32/kg during midmonth, the average for the first three weeks of June 2024 fell by a whopping 41.6% (-R5.69/kg) m/m to R7.98/kg on limited uptake despite a contraction in volumes across markets,” he said.
Other big-ticket items such as potatoes saw a weekly decline of 1.9% (-R0.12/kg) w/w and were down by 19.5% (-R1.44/kg) y/y at R5.95/kg.
Makube says however, the average potato prices for the first three months of June increased sharply by 16.1% (+R0.87/kg) m/m but were still down by 14.8% (-R1.09/kg) y/y at R6.25/kg.
“In the fruit category, avocados, bananas, and pears posted declines last week while apples, grapes and mangoes came in on the upside. Bananas were the biggest losers with decreases of 17.1% (-R1.31/kg) w/w and 5.9% (-R0.40/kg) y/y at R6.33/kg (table 2). However, the average banana prices so far for the three weeks of the month shows a marginal uptick of 1% (+R0.07/kg) m/m at R7.18/kg which is 8% (+R0.56/kg) higher y/y.
“Grape prices posted sharp gains of 40.8% (+R18.34/kg) w/w due to a substantial decline in volumes last week. At R63.25/kg, grape prices were however 18.1% (-R13.98/kg) lower y/y. Monthly, the average for the first three weeks of June shows that grape prices have so far advanced by 51% (+R17.09/kg) m/m although still down by 21% (-R17.09/kg) y/y at R50.67/kg. See table 2 for weekly trends on the rest of the fruit commodities.”
