Johannesburg, 19 June 2019 – The uptick in consumer price index figures for May 2019 amid low growth is discouraging for consumers and businesses and may negatively affect consumer sentiments and spending, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Chief Economist Michael Ade said this morning.
According to the latest data released by Statistics South Africa today, the annual headline consumer price inflation increased from 4.4 percent in April 2019 to 4.5 percent in May 2019, while the core CPI remained unchanged at 4.1 percent in May 2019. On a month-on-month basis, the headline CPI was 0.3 percent in May 2019.
“This is discouraging for over-indebted consumers who are clearly struggling to cope, as reflected by the dip in final consumption expenditure in Q1 2019, decreasing by 0.8%,” Dr Ade said.
He added that given the low-growth context, the general increase in the prices of goods and services does not augur well for embattled domestic consumers and the South African households in general as higher CPI numbers increase the nominal prices of goods and services, also impacting negatively on over-indebted consumers’ household budgets and reducing the ability to service existing debts or to make extra payments.
Dr Ade said companies in the broader manufacturing sector, including its heterogenous metals and engineering sector, will also not benefit from higher inflation due to a possible decrease in the demand for intermediate and final manufactured goods.
“However, we sound a caveat against reading too much into the current data, which does not constitute a trend, given its high level of volatility. This is because changes in factors affecting supply, including high-frequency data, may also negatively impact on the CPI numbers as businesses pass on cost increases into the market,” Dr Ade concluded.