Spike in medical costs as a result of inflation
This rise in medical insurance fees as well as an increase in food and non-alcoholic beverage prices was a notable contributor to the consumer price index (CPI) which increased by 1% month-on-month in February, according to the latest figures released by Statistics SA (Stats SA).
FNB economist Matlhodi Matsei said: “CPI for personal care perked up by 2.3% year-on-year from 1.7% previously. Furthermore, the February 2020 survey for medical aid and private health care costs revealed a jump in insurance inflation to 7.7% year-on-year (7.1% previously) - the highest level in two years. It is worth noting that the CPI for personal care and insurance make up 81% of the miscellaneous goods and services basket. It follows that the higher insurance CPI nudged core inflation to a higher 3.8% year-on-year from 3.7% previously.”
The annual rise in food and non-alcoholic beverages was 4.2%, higher than the 3.7% recorded in January.
Annual bread and cereals inflation slowed from 6% in January to 4.8% in February. Annual meat inflation increased from 2.4% to 4.1%.
Stats SA said: “The annual inflation rate nudged up to 4.6% in February from January’s 4.5%, inching past the 4.5% midpoint of the South African Reserve Bank’s (SARB) monetary policy target range.”
In terms of the domestic macro economy, attention will now shift to SARB’s monetary policy committee (MPC), which is holding its scheduled meeting this afternoon.
Chief economist at the Bureau for Economic Research (BER), Hugo Pienaar, said: “I don’t think today’s CPI numbers will have any bearing on the MPC’s decision. For them it’s all about the outlook for inflation as opposed to the historic number, and of course the very weak real GDP growth outlook for the world and South Africa will weigh heavily on them. We expect a 50bps (basis points) interest rate reduction.”
However, Absa economist Miyelani Maluleke said: “The February CPI data came in slightly higher than expected.
“The magnitude of the upside surprise is unlikely to have a material effect on the MPC’s rate decision.
“We see the MPC likely cutting by 25bp with a risk of a larger cut, given the negative economic impact of Covid-19. Moreover, headline CPI is still likely to ease markedly in the coming months, temporarily falling below 4% in April.”
Meanwhile, Stats SA reported retail trade sales increased by 1% in the three months ended January, compared to last year. The main contributors to this increase were: general dealers (0.9% and contributing 0.4 of a percentage point); and retailers in food, beverages and tobacco in specialised stores (3.5% and contributing 0.3 of a percentage point).@MwangiGithahu