Headline consumer inflation has increased to 5.9% in October from 5.4% in September.
According to Nedbank, the outcome was higher than what they had forecast. The bank had thought that the increase would only be 5.4%.
“The upward pressure came from the ‘food and non-alcoholic beverages’ category, which added 1.6 percentage points (pps). The ‘housing and utilities’, 'transport', and'miscellaneous goods and services’ categories also added to the upside, contributing 1.3, 1.1, and 0.8 pps, respectively,” according to the financial institution.
FOOD PRICES
The bank noted that prices in the food and non-alcoholic beverages category remained higher in October, rising by 8.7% year on year from 8.1% in September as food prices were more resilient than expected.
While decelerating for six consecutive months in 2023, food inflation accelerated to 8.8% from 8%.
TRANSPORT COSTS
It should be noted that, according to Nedbank, SA Transport, costs accelerated to a six-month high of 7.4% year-on-year in October from 4.2% in September.
This was due to higher fuel prices, which jumped by 11.2% year on year from 1.5%.
HOUSING AND UTILITIES
Housing and utilities inflation moderated slightly to 5.4% year-on-year from 5.5%, the bank noted.
“Prices of ‘actual rentals for housing’, ‘owners’ equivalent rent’, ‘electricity and other fuels', and ‘water and other services’ were broadly unchanged.”
EXPECTATIONS FOR THE FUTURE
Reza Hendrickse, a portfolio manager at PPS Investments, said on Wednesday that in the future, economists expect disinflation to resume from here and to return to the midpoint of the SARB’s target band by the end of next year.
“This mirrors the trend expected in the US, where inflation is also forecast to continue falling during 2024. For this reason, the market believes we have reached the peak in the interest rate cycle,” he said.
He also noted that the interest rate futures market currently suggests rates in SA will fall around 50 bp by the end of next year.
“Reduced price pressure and lower debt funding costs would be well-received by consumers who are starting to feel the pinch”.
He does add that although the current high-interest rate environment is uncomfortable for those that take out loans, investors have been able to capitalise on the high yields available from low-risk asset classes such as cash.
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