CPI for September 2020

Consumer price inflation decreased to 3.0% year-on-year as at the end of September 2020, and therefore remains at the lower end of the target band. All of the groups measured added to inflation, however the main contributors in September were “Food and non-alcoholic beverages”, “Housing and utilities”, and “Miscellaneous goods and services”.

The headline CPI number masks the fact that many essential goods, such as food, have seen a higher-than 3% rise in price over the past year. Unfortunately, this will have impacted lower income earners to a greater extent, given that food makes up a higher proportion of spend compared to higher income earners. The price of fruit for example is up 13.1% year-on-year, and the general price level of almost all other food groups measured has risen by more than 4%. The other area where consumers will have felt the impact of rising prices is in utilities, where electricity and water are 6% more expensive compared to this time last year.

Month-on-month inflation increased by 0.2% in September, made up by a 0.1% increase in Alcoholic beverages and tobacco, as well as a 0.1% increase in the residual. All other groups showed no price increase over the month.

The lack of economic growth locally has meant very little demand pressure, and has contributed to the environment of low inflation. Lower inflation is not a uniquely South African phenomenon however, with this being a trend globally that central banks are actively seeking to address. The low inflation environment has created a favourable backdrop for the SARB to lower interest rates by 3.0% this year, and it has been one of the most aggressive amongst its emerging market peers in terms of lowering rates. Although the repo rate is now at its lowest level in over 50 years, there is still a chance we might see a further rate cut when the Committee meets next month, given the benign inflation backdrop and weak domestic growth prospects.