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Meat prices expected to go up - analyst

Mar 23 2017 06:03
Lameez Omarjee

Johannesburg – Food inflation declined from 11.8% to 10% on an annual rate and lower food inflation is expected for the rest of 2017, but there is still pressure from rising meat prices, said an analyst.

According to a report on the latest consumer price inflation data released by Statistics South Africa (StatsSA) on Wednesday, economist at Momentum Investments Sanisha Packirisamy explained that food inflation had peaked in December but had slowed since then.

READ: Consumer inflation eases to 6.3%

StatsSA reported that inflation decreased from 6.6% in January 2017 to 6.3% in February 2017. Core inflation decreased to 5.2%, from the 5.5% annual rate reported in January. Core inflation is expected to average around 5.6% over the next 12 months, said Packirisamy.

Food inflation picked up 0.6% on a month-to-month basis in February. The upward pressure came from meat prices which were up 1.6% for the month. Fruit prices increased 1% and vegetable prices also increased 1.8% for the month, explained Packirisamy.

“In our view, meat prices are likely to show continued upward pressure in upcoming months in response to farmers rebuilding herds,” said Packirisamy. This follows a period of drought where levels of culling were higher.

“We do however expect this to be offset by a further fall in bread and cereal prices which should lead to lower food inflation, overall, in 2017,” said Packirisamy. Bread and cereal priced declined 0.3% for the month, StatsSA data showed.

Bread and cereal prices increased by 12.8% on an annual rate, this is lower than the previous 12-month average of 15.3%, said Packirisamy. In January these prices had risen 17%.

“Prices in this category should fall further given significant deflation for crops at the producer price level.”

The lower food inflation will provide some relief to consumers, she added. “We expect lower food inflation, which accounts for a larger share of the lower-income earner’s consumption basket, to provide some much-needed relief to these consumers in terms of the growth in their real wages.”

A recovery of 58c/l in petrol prices could also offset the fuel levy of 30c/l to be introduced in April 2017. The 29c/l increase in petrol prices in February drove up transport costs by 1.7% for the month. “An 8c/l cut is expected to provide some relief in March 2017,” she said.

Read Fin24's top stories trending on Twitter:

inflation  |  economy  |  food prices  |  petrol prices  |  cpi


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