The contraction may have played one positive role in the economy: It helped keep price rises under control.
Inflation reached only 3% in April – the lowest in 15 years, since the 2.8% measured in June 2005. This is significantly lower than the 4.1% measured in March.
This also means inflation is now at the lower level of the Reserve Bank’s target for the inflation rate, which is between 3% and 6%. The Reserve Bank decides on the interest rate again in July, but most economists doubt whether consumers with debt can expect another interest rate cut after the rate has already been reduced by a total of 2.75 percentage points this year.
Nedbank economists Busisiwe Radebe and Nicky Weimar expect inflation to fall even further in the short term given the pressure on demand due to the Covid-19 crisis.
The Reserve Bank itself forecasts average inflation of 2.8% for the second quarter and 2.9% for the third quarter.
Nedbank reckons the Reserve Bank will be reluctant to lower the interest rate further this year unless economic growth expectations for the full year weaken to below the -7% currently forecast by the central bank.
According to Statistics South Africa (SSA), prices fell by 0.5% between March and April. April was the first, and most severe, period of South Africa’s containment in order to slow the spread of the Covid 19 pandemic.
Food prices were 4.4% higher in April than in April 2019. Housing and utilities (power and water) were a total 4.6% more expensive than a year ago. Thanks to lower fuel prices, transport was 3.5% cheaper.
SSA comprehensively explains how to set prices during the restriction. A total of 26.5% of the products in SSA’s inflation basket could not be measured in the month due to the restriction. SSA made inferences about it based on the prevailing inflation rate. Other prices are set online, rather than on store shelves.
The service warns that there may be some deviations due to the methodology to be followed, but also points out that not all products and services are measured every month. Most of the services measured in April – such as the cost of medical aid and bus tickets – could be accurately measured.
- Food prices
The basket of food that SSA measures was 4.4% more expensive in April than a year ago, or 4.2% if non-alcoholic beverages such as soft drinks, coffee and tea are included. In the first five weeks of the restriction, however, South Africans were allowed to shop for essential products.
The sharpest increase was in the price of fruit, which was a whopping 9.1% more expensive than a year ago. Other relatively sharp price increases were for meat (6.1%), fats and oils (6.5%) and sugar and sweets (6.5%). Only vegetables were cheaper than a year ago, and only 0.1%.
- Nuclear Inflasia
Core inflation, which excludes food, power and fuel, fell from 3.7% in March to 3.2% in April. This figure is also considered important by the Reserve Bank because it neglects the most volatile items – those that are influenced by seasonal factors and the rand-dollar exchange rate, respectively – and therefore considers a more reliable measure of possible price pressure in the economy. can be.
Pensioners experience inflation of 3.3%, somewhat higher than the overall figure.
The country’s poorest residents are experiencing inflation of 4.1%, which is well above the 3%.
- Provincial figures
Countrywide, inflation ranges from 2.4% in the Eastern Cape to 3.6% in the Western Cape. Only in three provinces is inflation at or above 3%: KwaZulu-Natal (3%), the Northern Cape (3.1%) and the Western Cape (3.6%).