Surge in fuel prices hikes February's consumer inflation to 4.1%
Data released by Statistics SA on Wednesday showed that inflation rose on administered and fuel price increases. Fuel prices increased by 7 cents a litre in February and by 74c a litre this month. Prices are expected to rise by 97c a litre in April as a result of under-recovery.
PwC said: “Fuel prices will see an annual increase in taxes and levies in April of around 30c a litre. Furthermore, electricity prices are increasing by 13.8 percent in July 2019. Food price inflation is likely to rise due to higher fuel and electricity costs as well as lingering drought conditions in certain parts of the country."
In January the Sarb’s quarterly Projection Model forecast that headline inflation would average 4.6 percent this year and 4.8 percent in 2019 before increasing to 5.3 percent in 2020 and moderating to 4.8 percent in 2021.
Most analysts said the slight bump in inflation last month was expected.
PPS Investments portfolio manager Luigi Marinus said prices of water and other services increased by 11 percent year on year in February and electricity and other fuels increased 7.6 percent year-on-year.
“This shows that administered prices remain well above the total inflation level, with the risk that this is likely to further increase, given that the National Energy Regulator of South Africa (Nersa) approved increase will be implemented on April 1,” Marinus said.
“On the positive side for consumers, inflation printing below the midpoint of the target band is likely to deter the Reserve Bank governor from implementing any interest rate hikes, especially in the short term.”
Investec economist Kamilla Kaplan said higher headline inflation readings in the coming months would be a function of administered price inflation. “These higher living costs, in the context of subdued consumer confidence, benign credit extension rates and constrained wage growth, will serve to dampen consumer spending on discretionary goods and services and so limit the ability for retailers and service providers to pass on higher costs,” Kaplan said.