PPS Investments: CPI for February 2023

Consumer price inflation increased by 7.0% year-on-year in February 2023, slightly up from the 6.9% year-on-year print in the previous month.

This marks the first increase in inflation since October 2022 but remains below the recent peak of 7.8% in July 2022. Month-on-month inflation increased by 0.7%, compared to the 0.1% decline in January.

Food and non-alcoholic beverages were once again the largest contributors (2.3%) to year-on-year inflation, with the increase over the 12 months unchanged at 13.4%. Transport was the second largest contributor at 1.4%, but this was slightly less than the 1.6% contribution last month, while miscellaneous goods and services contributed 1.0%. Although the year-on-year increase to transport costs has moderated in line with the oil price decline, South African consumers remain under pressure in an increasing interest rate environment and consistently high increases to food in particular. In addition, the effect of the approved electricity price increase is yet to be included in the inflation print and will add to inflation when it comes into effect.

The global banking landscape has come under pressure recently with the difficulties experienced by Silicon Valley Bank and Credit Suisse, which may have tempered the US Federal Reserve’s monetary policy approach, but there is unlikely to be short-term reprieve in the South African Reserve Bank’s approach. With inflation remaining stubbornly above the top end of the target band the likelihood of another rate hike in the next Monetary Policy Committee meeting remains high.