Although food inflation slowed to 5.4% year-on-year (y/y) in September from 5.7% y/y in August and 6.8% y/y in July, this was not enough to prevent a rise in the overall consumer inflation rate to 5.1% y/y in September from 4.8% y/y in August and 4.6% y/y in July.
This increase was largely due to a swing in the fuel price inflation from a 3.6% y/y decline in July to a 5.7% y/y rise in August and a 12.2% y/y jump in September. There should be a moderation in the fuel price inflation to the 11% y/y level in October, which together with a continued easing in food inflation should reverse the rise in inflation and bring it back to near or below the 5% y/y level.
Unprocessed food prices for things such as meat, eggs and vegetables slipped to 6.5% y/y in September from 6.6% y/y in August and 6.8% y/y in July, while processed food prices for things such as bread and yoghurt eased to 4.3% y/y in September from 4.8% y/y in August and 6.8% y/y in July.
What is notable is that the food index for bread and cereals declined by 2.8% y/y in September, as the record maize harvest is being processed, while the index for oils and fats decreased by 3.3% y/y as the record soybean harvest is turned into oil.
The index for fruit fell by 4.4% y/y, while that for vegetables edged down by 0.5% y/y as better rains lead to larger crops. On the other hand, farmers are replenishing their herds, so there is less supply of meat, which pushed up the price of meat by 15.6% y/y in September. A wrinkle here is the recent outbreak of avian influenza, which has resulted in the culling of large numbers of chickens. Given the weight of poultry in the overall food price inflation, the spreading avian influenza will remain a key upside risk to food inflation over the foreseeable future.
Core inflation, which excludes volatile components such as food and energy, was steady at 4,6% y/y in September and August from 4.7% y/y in July after being steady at 4.8% y/y in June, May and April. This steadiness in the core measure shows that inflation expectations are well anchored and if this rate moves below 4.5% y/y then one should expect a further repo rate cut by the South African Reserve Bank.
On a Grahamstown level, consumer inflation for the Eastern Cape rose to 4.8% y/y in September, which is below the national rate of 5.1% y/y, from 4.2% y/y in August.