The petrol price rose 39c/l in Jan and we expect food inflation accelerated to 3.8%y/y

We expect CPI inflation accelerated to 5.7%y/y in January 2014 from 5.4%y/y in December.

Petrol price inflation, which rose 10.0%y/y in December on the back of a 17c/l increase in petrol prices, rose again in January 2014 by 14.7%y/y on the back of a 39c/l increase. The petrol price increase will have added 0.26ppts directly to January CPI versus December, increasing the headline CPI rate from 5.4% to 5.66%.

Another 39c/l rise in the petrol price in February will actually decrease petrol’s contribution to February’s CPI to 0.8ppts from 0.83ppts in January, as the base effects reduce the YoY inflation rate of petrol from 14.7% to 14%y/y. (fig. 1).

We expect food inflation will have added an additional 0.04ppts to January’s CPI. We note that food CPI surprised to the downside in December and decelerated to 3.5%y/y from 3.7%y/y in November. We expect the declining trend in food inflation over the preceding four months to have run its course and for food to have rebounded to 3.8%y/y in January as higher maize prices and the weaker rand feed through the food supply chain (figs 3&4). The rand price of oil tends to take about 6 months to affect food CPI. In particular, we note that meat prices have historically responded to higher maize prices with a 2 month lag and that while meat price inflation was very low in December, at 0.1%y/y, supply chain pressure may be building.

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