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Food prices propel May’s inflation to January 2017 levels

Momentum Investments have released their latest research note titled, Food prices propel May’s inflation to January 2017 levels, prepared by the Momentum Macro Research Team. Herewith a summary of highlights from the team, as well as a downloadable PDF of the research paper and commentary by Sanisha Packirisamy, Economist at Momentum Investments and Herman van Papendorp, Head of Investment Research & Asset Allocation at Momentum Investments.


  • According to Statistics South Africa (Stats SA), May’s inflation figure reached the highest level since January 2017.

  • Headline inflation jumped to 6.5% in May 2022 from 5.9% in April. The figure surprised financial markets significantly to the upside given the Reuters consensus estimate of 6.2%.

  • The monthly 0.7% uplift in headline inflation was largely underpinned by an increase in food prices, with a notable rise in bread and cereal prices and the price of oils and fats.

  • The Russia-Ukraine war has affected the global grains and vegetable oils trade, while floods in KwaZulu-Natal (KZN) have added an additional layer of price pressure. Rising input costs, including agrochemicals and fertilisers, continue to pose a threat to farming costs especially given the higher fertiliser requirement for replanting following the extensive flood damage in KZN.

  • Although petrol prices (inland 95) dipped by 12 c/l in the May inflation report, the transport category is likely to face renewed upward pressure given the R2.33/l increase in June. Petrol prices are expected to remain elevated into July, with the Central Energy Fund (CEF) estimating a current under-recovery of R1.92/l.

  • Nearly 40% of the weighted inflation basket experienced price increases above 6% in May 2022. Categories registering inflation above this mark last month included food, alcoholic beverages, electricity, transport and hotels.

  • In our view, the level of South African Reserve Bank (SARB) interest rate normalisation and the extent to which the interest rate hikes are frontloaded remain a function of the Monetary Policy Committee’s view on the degree to which current global inflation shocks are likely to feed through into underlying inflationary pressures by stoking higher wage growth and prompting more broad-based price increases outside of food and fuel.

  • Today’s higher-than-expected inflation figure reinforces our view of a 50-basis point increase at the July 2022 interest rate-setting meeting. We expect an additional three hikes of 25 basis points each to follow, ending the hiking cycle at 6%.

Download the research note: Food prices propel May’s inflation to January 2017 levels

CPI - 22 June 2022
Download PDF • 220KB