· South Africa's headline consumer inflation has risen to 7.0% Y-O-Y
· M-O-M inflation was 0.7% up from -0.1% in January 2023
· Analysts had expected the year-on-year figure to remain the same at 6.9%
Harare-South Africa's headline consumer inflation has risen slightly higher than expected in February, according to data released by Statistics South Africa. Year on year, inflation grew by 7.0% from 6.9% in January, while month on month inflation was 0.7% in February, up from -0.1% in the previous month. Analysts had expected the year-on-year figure to remain the same at 6.9% and a month on month increase of 0.6%.
These new figures come as South Africa continues to battle with power cuts that have been affecting businesses and economic growth in the country. The South African Reserve Bank has a target inflation rate of between 3% and 6%. Despite raising interest rates at the last eight monetary policy meetings to control inflation, the central bank raised rates by a smaller than forecast 25 basis points in January as it cut its economic growth forecasts due to the effects of the power cuts.
The central bank has predicted that inflation will sustainably fall to the midpoint of the target range by the fourth quarter of 2024. In February, core inflation, which excludes prices of food, non-alcoholic beverages, fuel, and energy, was at a year-on-year rate of 5.2%, up from 4.9% the previous month. On a month-on-month basis, core inflation was 0.8% in February, compared to 0.2% in January.
It is worth noting that inflation is a key indicator of the economic performance of a country, and the current surge in inflation in South Africa could lead to a slow-down in economic growth. The Reserve Bank is likely to continue to monitor inflation closely and could take further measures to ensure that it remains within the target range.
The rise in inflation in South Africa could have far-reaching implications for the Zimbabwean economy, given their close economic relationship. According to February Zimstat Statistics, 49% of Zimbabwe's external trade is with South Africa. Unfortunately, Zimbabwe has been facing its own economic struggles, including high inflation and a currency crisis, and it heavily relies on imports from South Africa. As such, the effects of South Africa's inflation on Zimbabwe could be profoundly negative.
The increase in South African inflation could lead to a rise in the cost of imports from South Africa to Zimbabwe, which could exacerbate the already high costs of goods and services. This could further worsen the inflation rate in Zimbabwe and negatively impact the country's economy.
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