Headline inflation softened to 5.1% y/y in December 2023
25 Jan, 2024

Herman van Papendorp, Head of Investment Research & Asset Allocation, Tshiamo Masike, Economic Analyst at Momentum Investments and Sanisha Packirisamy, Economist at Momentum Investments


Momentum Investments have released their report based on ‘Headline inflation softened to 5.1% y/y in December 2023’ prepared by the Momentum Investments Macro Research Team.


Please see below, a summary of highlights from the team, as well as the full research note attached.


Highlights _________________________________________________________________________________


According to Statistics South Africa (Stats SA), headline inflation (CPI) decelerated to 5.1% year-on-year (y/y) in December 2023 from 5.5% y/y in November. The annual rate was 5.9% for 2023, which is in line with our expectations.


  • Core inflation (headline inflation excluding food and non-alcoholic beverages (NAB), fuel and energy) remained unchanged at 4.5% in December, resulting in an annual rate of 4.8% for 2023.


  • The deceleration in December’s headline inflation was largely attributed to falling fuel prices and the decrease in food and NAB inflation.


  • Rental inflation edged up in December but remained subdued which signals weak demand-pull inflation.


  • Transport inflation eased to 2.6% y/y in December from 4.3% y/y in November on the back of lower fuel prices. Further fuel price cuts in January will provide additional reprieve for the January inflation figure. The Central Energy Fund’s (CEF) estimated under-recovery points to marginal fuel price increases of just below R0.40 c/l in February.


  • The average price of Brent crude oil is falling despite the conflict in the Middle East and voluntary oil supply cuts implemented by OPEC + (Organization of the Petroleum Exporting Countries Plus). The United States (US) Energy Information Administration (EIA) forecasts the average price of Brent crude oil in 2024 at US$82/bbl. Rising geopolitical tension in the Middle East introduces a risk of oil supply disruptions which could place upward pressure on oil prices.


  • Food inflation softened to 8.5% y/y in December (9% y/y in November) led by lower vegetable inflation. According to the SA Weather Service (SAWS), EL Niño has reached a “strong state” but agricultural experts maintain that the impact on food inflation will be minimal primarily due to good soil moisture.


  • The Bureau for Economic Research (BER) published higher inflation expectations in its 2023 fourth quarter survey. The main cause of the upward revisions was labour unions. The SA Reserve Bank (SARB) will likely do more signalling to price setters (trade unions and businesses) to suppress cost-push pressures.


  • The softer inflation rate in December, contained core inflation, falling international oil prices, the containment of the Avian flu outbreak and the expectation of a muted impact from El Niño suggest that inflation is likely to continue on a decelerating path through 2024. However, the SARB remains concerned about inflation persistence, lingering inflation risks and elevated inflation expectations. Consequently, we expect the Monetary Policy Committee (MPC) to keep the repo rate constant at 8.25% at the January 2024 meeting. In our view, the SARB needs to see a sustainable decrease in inflation first before considering interest rate cuts. We forecast the first interest rate cut to be implemented in the second quarter of 2024, at the earliest.


Download the full report – click below:





@Herman van Papendorp
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@Tshiamo Masike
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@Sanisha Packirisamy
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