Consumer inflation accelerates as fuel prices bite

Consumer inflation accelerated in June, thanks mainly to rising fuel prices.

The consumer price index (CPI) rose 4.6% in June from a year earlier, picking up the pace from May’s 4.4% increase. The pace of acceleration was slightly slower than expected, though — expectations were for an increase of 4.8%.

Fuel prices — which make up 4.58% of the CPI — increased by 16.3% in June from a year earlier, Statistics SA data showed on Wednesday. That followed a 9.4% increase in May from the previous year.

Petrol prices rose by 82c a litre to a new record in June, while diesel prices rose by between 82c a litre and 87c a litre.

There is little relief on the horizon for consumers, after further — though much smaller — increases took effect in July.

A weaker rand and higher international oil prices have hit SA with a double whammy, and the outlook for both of these factors will be on the Reserve Bank’s mind as it meets for three days this week to decide on monetary policy.

That decision is due on Thursday, and the Bank is expected to stay its hand. That would leave the repo rate at 6.5%, after the Bank delivered a 25 basis points cut in March, and left rates unchanged in May.

Though the Bank bases its 3%-6% inflation-targeting band on CPI, it uses forward projections for CPI inflation when making its policy decision, rather than Stats SA’s historical data.

Food inflation — which makes up more than 17% of the index — has slowed dramatically from the double-digit rates last seen in about April last year, and prices for food non-alcoholic beverages were flat in June — from inflation of 3.4% in May.

Compared with May, the CPI increased 0.4% in June.