15.12.2016

South Africa’s food inflation decelerates

Recent Consumer Price Index data shows that food and non-alcoholic beverages inflation decelerated to 11.6% year-on-year (y/y) in November 2016 from 11.7% in October 2016.
- Wandile Sihlobo

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Recent Consumer Price Index data shows that food and non-alcoholic beverages inflation decelerated to 11.6% year-on-year (y/y) in November 2016 from 11.7% in October 2016[1] (with non-alcoholic beverages aside, food inflation fell to 11.8% y/y in November 2016 from 12% y/y in October 2016).

Food and non-alcoholic beverages basket consist of bread and cereals; meat; fish; milk, eggs, and cheese; oils and fats; fruit; vegetables; sugar, sweets, and desserts; non-alcoholic beverages and other foods.

The overall decline was driven by milk, eggs, and cheese; oils and fats; vegetables and other foods which eased at 10.2% y/y, 12.0% y/y, 12.2% y/y and 12.3% y/y, respectively (see Chart 1).

The decrease in milk, eggs, and cheese inflation coincide with seasonal milk price trend which normally decelerates during mid-summer season owing to an increase domestic milk supplies on the back of improving grazing fields. Moreover, oils and fats inflation mirror the domestic sunflower seed prices which have maintained a declining trend due to relatively large domestic supplies. The fall in vegetable inflation coincides with increasing domestic supplies on the back of ongoing harvest for a number of vegetable crops.

Meanwhile, bread and cereals, meat, fish, fruit and non-alcoholic beverages inflation accelerated to 17.0% y/y, 6.0% y/y, 10.6% y/y, 25.0% y/y and 9.6% y/y, respectively (see Chart 1). To some extent, the increase in these food products inflation still mirror the effects of the 2015/16 drought[2].

Looking ahead – we maintain our view that overall food and non-alcoholic beverages inflation could remain elevated this year. However, we foresee a slowing trend for most food products inflation in 2017, with the exception of meat which is likely to maintain the upward trend over the coming months due to expected decline in slaughtering rate (see South Africa’s food inflation accelerates, 23 November 2016) (see Chart 2).



Wandile Sihlobo (Tel: +2712 807 6686, Email: wandile@agbiz.co.za)

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