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South Africans are paying 13% more for meat - analyst

Jul 19 2017 17:32
Lameez Omarjee

Johannesburg- South African consumers are paying 13% more for meat than they were a year ago, said an analyst.

Following the release of the latest inflation data by Statistics South Africa (Stats SA) on Wednesday, which showed that inflation eased to 5.1% in June, Momentum Investments economist Sanisha Packirisamy explained that food inflation had remained relatively flat.

Limited livestock for slaughtering had driven prices up by more than 20% for suppliers, and this is impacting prices at consumer level, she explained. But the 0.6% uptick in meat prices was offset by the 0.1% decline in bread and cereals as well as the significant drop in prices for fruits and vegetables. Improving weather conditions had helped lower prices for agricultural producers.

READ:Inflation falls for third month in a row

The crops estimates committee expects commercial maize production to come to 15.6 million tonnes, the increased supply expectations have led to downward pressure on grain prices, said Packirisamy. Between 10 and 10.5 million tonnes are likely to be used for domestic consumption, but exports may be limited due to competition in the global market, according to Santam.

Citibank economist Gina Schoeman said that some relief in meat inflation is expected toward the end of the year. Food inflation could end the year at 5.4%, and remain stable during 2018 as meat in prices start to disinflate. Citibank expects July inflation to drop to 4.5%, which could lower the inflation trajectory significantly.

Although unchanged at 7%, food inflation is still below the 12% year-on-year peak reported in December 2016, said Stanlib chief economist Kevin Lings. Stanlib expects food inflation to fall back within the target band before the end of the year.

Lower food inflation coupled with lower petrol inflation could see overall July inflation to dip below 5%, said Lings. The 70c/l petrol price cut in July could shave off 0.3 percentage point s from the inflation rate.

Core inflation remained steady at 4.8%, for the third consecutive month. This could reach midpoint of the inflation target in the next few months, said Lings.

Emerging market inflation

The inflation rate in emerging markets has been trending lower, having fallen to below 4% in April, according to data from the International Monetary Fund (IMF). “This is the lowest level of consumer inflation in emerging markets for a little over 48 years,” said Lings. Many emerging markets like South Africa still have an inflation rate higher than 4%.

These low inflation rates are helping central banks decide to cut interest rates in countries like Brazil, Russia and India. Stanlib is of the view this may be a key in supporting an argument for a rate cut in South Africa. 

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