Inflation has hit a 30 month high, with the Consumer Price Index (CPI) accelerating to 5.2% in May from 4.4% in April, in figures released by Stats SA on Wednesday.
In reaching the 5.2% mark, not only has it hit the highest level since November 2018, it crosses the midpoint of the South African Reserve Bank’s (Sarb) inflation target of 3-6%.
The sharp increase in inflation puts pressure on the Sarb, which has cut interest rates by three percentage points in the past year as a way to support the economy in the wake of the Covid-19 crisis.
With CPI now crossing the bank’s inflation target, its Monetary Policy Committee will have to think long and hard about whether it should divert from its current policy of maintaining interest rates or raising them to control inflation.
Fuel price rise
The biggest driver to the increase in CPI is the price of fuel, which is 37% more expensive than it was a year ago.
“Despite a small monthly drop in the fuel price in May, the annual increase quickened to 37.4% from 21.4% in April,” Stats SA said.
The rise in fuel prices can be seen in petrol prices being 41.8% higher in May 2021 compared with May 2020, while diesel is 27% more expensive.
When fuel, food & non-alcoholic beverages, and energy are excluded, the rise in core CPI is a more muted 3.1%.
Not just fuel
Aside from higher fuel prices, food & non-alcoholic beverages inflation showed a notable acceleration to 6.7% in May from 6.3% in April.
“May’s reading is the highest since July 2017. Meat, fish, oils, sugar, sweets and desserts recorded rates higher than 6.7%.
“Annual meat inflation has stubbornly remained above 6% since October 2020, climbing to 8.5% in May. Prices for fish products increased at a brisk 7%, slightly lower than April’s 8.1%.”
There was also a notable increase in alcoholic beverages & tobacco products, which registered an annual rise of 5.8%. Wine prices have jumped 7.2% and tobacco prices by 6.6%.