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PPS Investments: CPI for October 2022

23 November 2022 Luigi Marinus, Portfolio Manager at PPS Investments

Consumer price inflation increased by 7.6% year-on-year in October 2022, marginally higher than the 7.5% year-on-year print in the previous month.

Inflation now averages 6.8% for the calendar year 2022 to date which remains above the top end of the target band. Month-on-month inflation increased by 0.4%, compared to the 0.1% increase the previous month.

As was the case for the last nine months, transport was again the largest contributor to inflation over the past year. Transport has contributed 2.4% of the 7.6% increase over the year, and although it remains high, it has been declining as a proportion of total inflation as the global oil price has moderated from the recent highs. On the other hand, the contribution of food and non-alcoholic beverages has been increasing, with a contribution of 2.1% to inflation. Other large contributors to inflation over the year are housing and utilities (1.1%) and miscellaneous goods and services (0.7%). As was the case for the past few months, all 11 inflation groups saw an increase in prices year-on-year highlighting the broad nature of the inflation increase. Food and public transport, which are important inflation considerations for many South African consumers, increased 12.3% and 23.3% respectively over the year, in part as a result of the secondary effect of the 30.1% increase in fuel prices.

The South African prime lending rate is 2.5% higher than it was a year ago and there is likely to be some disappointment that inflation has not decreased faster. The South African Reserve Bank has maintained a hawkish stance which is likely to result in continued rate hikes after this uptick in inflation. Consumers may have to accept that in a world of high inflation there is little hiding room and the balance of the decision between increasing interest rates or increasing prices is not straightforward.

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