JOHANNESBURG – South Africa consumer price inflation slowed to 3.1 per cent in August, down from 3.2 percent in July.
According to Kamilla Kaplan, an economist at Investec Bank Limited, “CPI inflation eased slightly to 3.1% y/y in August from 3.2% y/y in July, on a smaller contribution from the recreation and culture category and a negative contribution from the residual component.”
Recreation and culture inflation slowed to 1.0% y/y from 1.2% y/y in July, translating to a drop in the contribution to headline CPI inflation to 0.0% in August from a previous 0.1%. Within this category, package holidays remained in deflation at -4.0% y/y in August amid the Covid-19 linked travel restrictions.
In terms of the more heavily weighted CPI categories, the contribution from food and no-alcoholic beverages (weighted at 17.24%) remained unchanged at 0.7%. Food price inflation in particular moderated to 4.3% y/y from a prior 4.6% y/y.
Inflation in the transport component (weighted at 14.28%) lifted modestly to 0.2% y/y from a prior 0.0% y/y, yielding an unchanged contribution of 0.0%. The lift in the inflation rate can be ascribed mainly to the deceleration in the rate of fuel price deflation to -5.3% y/y, from -6.2% y/y in July and rates in excess of -20% y/y in May and June.
The contribution from the housing and utilities component (weighted at 24.6%) remained unchanged at 0.8% in August. The rate of inflation slowed moderately to 3.1% y/y from a prior 3.2% y/y. This relates mainly to lower electricity tariff inflation, which is measured in the month of July, with some follow through to August. Specifically, electricity price inflation rose 6.2% y/y in August versus the 12.0% y/y increase in August 2019.
Core inflation, which strips out the more volatile energy and food components, remained at multi-year lows at 3.3% y/y in August versus 3.2% y/y in July. The modest rate of core inflation reflects subdued activity in the property market (falling rental inflation) and of “the domestic recessionary conditions which impeded the ability of businesses to pass on price increases to consumers”, according to the South African Reserve Bank.
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