PPS Investments: CPI for March 2023

Consumer price inflation increased by 7.1% year-on-year in March 2023, slightly up from the 7.0% year-on-year print in the previous month.

This is the second consecutive increase after inflation rose from 6.9% to 7.0% year-on-year last month. This means that inflation has averaged 7.0% for the year to date and needs to moderate for the remainder of the year to attain the 6.3% average that the South Bank Reserve Bank forecasted in the most recent Monetary Policy Committee (MPC) meeting. Month-on-month inflation increased by 1.0%, compared to the 0.7% increase in February.

Prices of food and non-alcoholic beverages increased by 14.0% year-on-year which was up from the 13.4% increase last month and meant that this was once again the largest contributor (2.4%) to year-on-year inflation. Transport (1.3%) and housing and utilities (1.0%) remained large contributors with fuel and public transport being sizable contributors. Electricity and other fuels increased by 8.2% year-on-year but the approved 18.65% hike in Eskom tariffs has come into effect in April (Municipal increase of 18.49% will be effective from 1 July) and will have a further impact on inflation going forward.

Although there was only a small increase to inflation in March, the concern is that the effect of the 4.25% of interest rate hikes since the start of this hiking cycle is more protracted and not yet having the desired weakening effect on inflation. After the surprise 50 basis point hike post the last MPC meeting, this increase in inflation may signal that we have not yet reached the end of the hiking cycle.