Medical and fuel inflation drove inflation higher in February
22 Mar, 2024

Sanisha Packirisamy, Economist at Momentum Investments



Momentum Investments have released their report based on Medical and fuel inflation drove inflation higher in February prepared by the Momentum Investments Macro Research Team.


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




  • According to Statistics South Africa (Stats SA), the consumer price index (CPI or headline inflation) rose to 5.6% year-on-year (y/y) in February 2024 from 5.3% y/y in January. Core inflation accelerated to 5% y/y from 4.6% y/y over the same period.


  • Higher medical insurance costs were the main reason behind the lift in core inflation and subsequently headline inflation. Higher fuel prices also contributed to the uptick in headline inflation.


  • Medical insurance inflation spiked from 6.9% y/y in January to 12.9% y/y in February. This reflects the substantial membership contribution hikes implemented by medical schemes in 2024 and the inclusion of all the tariff hikes in the February survey (base effects) as opposed to the typical bi-annual survey for medical aid rates.


  • The fuel price increases implemented in February were the main reason for higher transport inflation in February (5.4% y/y from 4.6% y/y in January). The larger fuel increases (above R1/l) in March point to further upside pressure on transport inflation in March. Early data from the Central Energy Fund (CEF) indicate a slight increase (R0.14/l) in the price of petrol (95, inland) but diesel (0.05%) users can expect a slight reprieve of R0.32/l in April.


  • The ongoing tensions in the Red Sea and the extension of voluntary production cuts by the Organisation of the Petroleum Exporting Countries Plus (OPEC +) are keeping international oil markets tight. The United States (US) Energy Information Agency (EIA) forecasts oil prices to remain elevated at an average of US$88/bbl in the second quarter of 2024, which introduces upside price pressures domestically, especially if the rand remains weak.


  • Further upside price pressures stem from intensifying drier weather conditions in some parts of SA during February and March 2024, an important period for agriculture according to the Agricultural Business Chamber of SA (Agbiz). The Crop Estimates Committee (CEC) has revised the expected commercial maize crop lower by 12.6% to 14.4 million tonnes for 2024. However, this remains sufficient to meet domestic demand. Other parts of Southern Africa are reported to be experiencing harsher and drier weather conditions than SA.


  • The 2024 starting point of the United Nations (UN) Food and Agriculture Organisation’s (FAO) Food Price Index (FPI) was much lower than 2023 and 2022 and decreased further by 0.7% month-on-month (m/m) in February.


  • The Bureau for Economic Research (BER) published lower inflation expectations for the first quarter of 2024 survey results at 5.4% for 2024 and 5.3% for 2025. The driver for lower expectations in both years were the price setters (businesses and trade unions) of the economy.


  • We maintain our view that the SA Reserve Bank (SARB) will likely keep interest rates constant at 8.25% at the March interest rate setting meeting.


  • We acknowledge the increased risks to our longstanding view that the SARB will begin the rate cutting cycle in the second quarter of 2024, at the earliest. These risks include the possibility of higher food inflation due to intensifying El Niño conditions, volatile and elevated inflation outcomes, still elevated inflation expectations and caution displayed by global central banks by keeping interest rates higher than the market had initially anticipated. We see the first move lower in SA interest rates increasingly more likely to commence in the third quarter of 2024.






@Sanisha Packirisamy
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