Headline inflation eased in November 2022 while core inflation remained unchanged
19 Dec, 2022

Momentum Investments have released their report based on ‘Headline inflation eased in November 2022 while core inflation remained unchanged’ prepared by the Momentum Macro Research Team.

Below is a summary of highlights from the team, as well as a downloadable PDF of the research paper. Commentary and highlights by Sanisha Packirisamy, Economist at Momentum Investments, Tshiamo Masike, Economic Analyst at Momentum Investments and Herman van Papendorp, Head of Investment Research & Asset Allocation at Momentum Investments.


According to Statistics South Africa (Stats SA), headline inflation dropped to 7.4% year-on-year (y/y). This is indicative of inflation easing at a headline level following a higher-than-expected figure of 7.6% y/y in October.
The headline inflation outcome was softer than the Reuters consensus of 7.5% y/y and is unlikely to have influenced markets.
The main contributors of the 7.4% reading remained food and non-alcoholic beverages (NAB), housing and utilities, transport and miscellaneous goods and services.
Core inflation on the other hand remained unchanged at 5% y/y but increased slightly by 0.1% on a month-on-month (m/m) basis.
Global food inflation continued on a downward trend in November 2022 owing to higher production levels and better supply chain conditions. However, local food prices remain elevated due to the weaker exchange rate.
Australia, the world’s second largest wheat exporter, after Russia, is expected to harvest its second consecutive bumper crop in 2022-2023 which will support lower global food prices in 2023.
Previous rand strength may be supportive of lower food inflation at the pipeline level (producer price inflation (PPI)) in November 2022. PPI data is scheduled to be released on 15 December 2022.
Despite a decrease in the price of Brent crude oil to US$94.1/bbl, petrol prices (inland, 93 and 95) increased by 51c/l in November due to rand depreciation. A further increase of 59c/l was announced by the Central Energy Fund (CEF) for December 2022, but this may be reversed with an expected decrease in January 2023.
Changes in the petrol price have a larger effect on private transport inflation relative to public transportation fares, given that public transport prices are generally stickier and take longer to reflect downward adjustments in the price of fuel. Public transport inflation nevertheless dipped in November relative to October.
The International Energy Agency (IEA) projects lower international oil demand and an increase in supply for 2023. This will be supportive of lower international oil prices going forward.
The gap between goods and services inflation remained wide despite inflation rolling over marginally in both categories. Lower services inflation bodes well for inflation expectations for the fourth quarter of 2022.
Today’s headline and core inflation outcomes broadly matched our projections and thus do not derail our expectation for a 50-basis point increase in interest rates in January 2023. December’s inflation figure will be released on 18 January 2023, roughly a week before the South African Reserve Bank (SARB) meets to deliberate on the interest rate outcome. While we expect this to be the peak in the interest rate hiking cycle, a further interest rate hike at the March meeting could materialise should inflation prove stickier than anticipated.

Download the full report – click below…



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