PPS Investments: CPI for April 2022

Consumer price inflation increased by 5.9% year-on-year in April 2022, unchanged from the print in the previous month.

Although CPI has remained within the target band, it marks a year since it was recorded below the midpoint of the band. Month-on-month inflation increased by 0.6%, which was lower than the 1.0% increase the previous month.

As was the case in the two previous months, transport was again the largest contributor to inflation (+2.0%), compared to the 2.1% increase in March and the 1.9% increase in February. Housing and utilities (+1.2%, unchanged from last month) and food and non-alcoholic beverages (+1.0%, up 1.1% in March) were the other large contributors over the year, with all 11 inflation groups increasing inflation for the third consecutive month. On an inflation sub-group level, the largest contributors were once again fuel (+29.2%), electricity and other fuels (+14.1%) and public transport (+12.6%). Even though there have been large increases in certain food items, like oils and fats (+21.2%) and meat (+8.5%), the overall food component of the basket was more benign compared to overall inflation, being up 6.3%.

As inflation has increased across the globe, South Africa has not been immune to these increases. The South African Reserve Bank (SARB) has been ahead of the curve by increasing interest rates even though inflation has remained within the target band. The recent US rate hike and expectation of further hikes is likely to be included in the SARB’s deliberations which is likely to result in further interest rate increases in South Africa too. To date the SARB has done well to keep inflation at a reasonable level and even if it does breach the top end of the band runaway inflation seems unlikely thanks to the SARB’s active approach. At PPS Investments we remain constructive on both nominal and inflation-linked bonds, looking to continue to benefit from our steep yield curve.