Consumer price inflation declined from 4,5% year-on-year (y-o-y) in April to 4,4% y-o-y in May, according to Statistics South Africa.

The latest reading is in line with economists’ expectations and is comfortably within the South African Reserve Bank (SARB) target range of 3% to 6%, according to PwC analysis.

The small decline in y-o-y headline inflation during May was associated with slow inflation on food and non-alcoholic beverages. Food price inflation declined to 3.0% y-o-y – the lowest reading since 2013.

According to StatsSA, bread and cereals, fruit, oils and fats, as well as sugar, sweets & desserts are now all cheaper compared to a year ago. Fruit prices declined by 2,3% month-on-month (m-o-m) during May, while breads and cereals were 0,8% m-o-m cheaper.

Meat price inflation has declined notably over the past nine months, declining from a peak of 15,6% y-o-y in September 2017 to 7,8% in May. One of the contributing factors was a sharp decline in wholesale pork prices since the start of the year, falling to a four-year low during April.

This was strongly associated with a slump in consumer demand for ready-to-eat processed meat products following an outbreak of listeriosis linked to this product category.

The drop in demand resulted in an oversupply on the market. Other factors contributing to lower meat prices included lower feed costs and a stronger exchange rate (making imports cheaper).

The SARB Monetary Policy Committee (MPC) met from 22 May to 24 May, and its seven members decided unanimously to make no change to interest rates. However, policymakers indicated that risks to the inflation outlook had now shifted to the upside due to a weaker exchange rate and higher international oil prices impacting expectations for local fuel prices.

In an interview with Bloomberg TV on 19 June, SARB deputy governor Kuben Naidoo warned that if the softer rand causes an increase in consumer price inflation and related forecasts, the MPC may have to raise interest rates.

The rand was trading near R14.oo to the US dollar early this week, while oil prices were at a three-year high in May.