“We welcome this move not only because it brings consumer inflation into the Reserve Bank’s 3% to 6% target range, but also because it is a positive development given the difficult position in which South African consumers find themselves and the weak state of the domestic economy,” SEIFSA Economist Tafadzwa Chibanguza said.
Mr Chibanguza added that September’s disinflationary trend could be attributed to the easing price of brent crude oil, which has continued to surprise downward, touching multi-year lows. The impact of the brent crude oil decline has been far greater than the opposite effect of the weakening of the Rand. This was reflected in the 67c/litre decrease in domestic oil prices.
Fuel costs have a significant inflationary impact since most products have to be transported in one form or another. Increases or decreases in fuel prices, therefore, had a blanket impact on inflation and the overall economy.
The majority of the sub-categories in the CPI remained unchanged. This also assisted with the downward pressure in the index.
Mr Chibanguza said that the easing in inflationary pressure was expected to persist until the beginning of the festive season, which will see increases in the food and beverages sub-components.
“However, we should sound a caveat for the interim period. The current easing in inflation is the result of variables that are outside of South Africa’s control. The easing brent crude oil price is largely a function of slow global growth and concerns that crude oil markets are over-supplied. The exchange value of the Rand is very sensitive to global and domestic economic events,” he said.
Mr Chibanguza said that the exogenous nature of these variables made it very difficult to anticipate the future trajectory of inflation. A change of these variables in either direction would have a corresponding impact on the domestic inflation path.