Headline inflation cools but food remains sticky on the upside, up 9% y-y in NOV 2023

A big monthly decrease in the fuel price index by 5.5% in November underpinned the recent pullback in headline inflation. The annual fuel rate dropped to 1.8% in October from 11.2% in October which further saw the transport subindex falling from 7.4% previously to 4.3% in November 2023. Food inflation remained sticky on the upside, clocking 9% y/y in November from 8.8% in October underpinned by increases in the milk, eggs, and cheese, as well as fruit, vegetables, and sugar, sweets and deserts subindices. The food CPI however decelerated month-on-month (m/m) from 1.7% in October to 0.7% in November 2023. Meat inflation steadied at 0.6% m/m and only nudged 0.1 percentage point to 3.5% y/y contrary to expectations of a surge following the avian influenza (AI) outbreak and its potential knock-on effect on the supply of chicken. Most broiler meat producers have consistently indicated that domestic supplies were adequate to meet demand, and this helped counterbalance a potential AI-induced price surge.

Further, the South African authorities contemplated an easing of trade tools to improve availability of chicken meat and ease pressure on consumers, but this is yet to materialise partly due to representations by the industry regarding domestic stocks. The AI outbreak’s impact was more pronounced in the layer industry which saw a massive contraction in the supply of eggs. Egg prices surged by 10.9% m/m in November with the annual rate jumping from 24.4% y/y in October to a whopping 39.9% y/y in November 2023. Consequently, the milk, eggs and cheese CPI accelerated faster to 13.9% y/y in November from 12.4% y/y in October. Nonetheless, we expect the supply situation to improve in the medium term following current interventions by authorities to accelerate the importation of fertilised eggs and table eggs, including efforts to deal with the disease in future through vaccinations.