PPS Investments commentary: CPI for September 2022

Consumer price inflation increased by 7.5% year-on-year in September 2022, down from the 7.6% year-on-year print in the previous month. Inflation now averages 6.7% for calendar year 2022 to date which is well above the top end of the target band.

Month-on-month inflation increased by 0.1%, compared to the 0.2% increase the previous month.

Transport remains the largest contributor to inflation over the past year as it has been every month this year apart from January, which coincides with the Russian invasion of Ukraine in February. Although transport has contributed 2.5% of the 7.5% increase over the year, the month-on-month contribution of transport saw a decline of 0.3% mainly due to the consecutive declines in the petrol price on the back of the slight moderation of the global oil price. Other large contributors to inflation over the year are food and non-alcoholic beverages (2.0%) and housing and utilities (1.0%). As was the case for the past few months, all 11 inflation groups saw an increase in prices year-on-year. Food and public transport which are important inflation considerations for many South African consumers saw increases of 11.9% and 22.1% respectively over the year, in part as a result of the secondary effect of the 34.1% increase in fuel prices.

Even though inflation has remained above the top end of the target band, the 7.5% print was in line with consensus and lower than the recent high. The market will likely be assuming that we’ve seen the peak inflation level and the trend will be lower going forward. The hawkish stance of the South African Reserve Bank will continue as South African and global inflation remains high and therefore an additional rate hike can be expected before the end of the year.