The data, unveiled by Statistics South Africa (Stats SA) on Wednesday, will focus the minds of the central bank’s Monetary Policy Committee (MPC) which is widely expected to maintain its rate hiking cycle when it meets next week for the first time in 2023.

Pointedly, food inflation finally showed signs of moderating while remaining elevated as global food prices come off the boil. In the year to December, food and non-alcoholic components of the CPI basket braked to 12.4% from 12.5% the previous month, while food inflation edged down to 12.4% from 12.5%. 

Annual inflation for alcoholic beverages, or just plain booze inflation, staggered lower to 6.6% in December from 7.0% in November, just in time for the annual Christmas binge. But, especially in poor households, beer is no substitute for bread that — combined with cereals — saw prices rise over 20% in the year to December.

Fuel inflation ticked up to 22.8% from 22.1% in November, but should moderate this month after the pump price was cut by over R2 a litre for petrol and R2.68 to R2.80 for diesel.

Read in Business Maverick: “Drop in fuel price one small relief in January 2023” 

Global oil prices have also been trending lower while the rand has been holding its own of late — a combination should bring further relief on that front. 

For all of 2022, inflation averaged 6.9%, 2.4 percentage points higher than the 4.5% average in 2021 and its highest annual average since 2009, when it was 7.1%. That is well outside the 3% to 6% mandated range of the South African Reserve Bank (Sarb), but at least inflation is slowly moving back in that direction.

“Advanced economy central banks continued hiking interest rates in December, with the Fed and ECB hiking rates by 50 basis points each. This, along with domestic inflation expectations that are yet to sustainably revert to the 4.5% anchor, should prompt further hiking by the Sarb this month,” FNB economist Koketso Mano said in a commentary on the data. 

“We expect the pace of hikes to slow to 50 basis points, following 75 basis points hikes in each of the past three MPC meetings… With inflation potentially falling closer to target in the second half of 2023, the MPC would have created sufficient policy space to support the economy towards year-end. 

“There is a risk that the MPC hikes rates by an even more moderate 25 basis points, avoiding too restrictive policy.” 

The Sarb, from November 2021 to November 2022, hiked rates by 350 basis points, bringing the prime lending rate to 10.5%. It will likely slow the pace of tightening, but it is ever mindful of future risks and will want to anchor inflation expectations firmly within its target range. 

Consumers will broadly welcome a slowdown in rate rises, though the Sarb might argue that they would also welcome the containment of inflation which such a policy direction is aimed at. 

Data also released by Stats SA on Wednesday showed retail trade sales rose a modest 0.4% in the year to November, with a month-on-month bounce of 1.1%. The latter was likely a reflection of Black Friday sales, a once-a-year event.  

This represented the first annual increase since August, when retail trade sales grew 2.1% year-on-year, and was the third straight monthly rise. The annual growth also defied expectations, per the Bloomberg consensus forecast, of a 0.6% year-on-year contraction.  

That points to some consumer resilience, but people are not exactly stampeding to the shops, a point not lost on retailers. 

The December Retail Trade survey conducted by the Bureau for Economic Research showed retail confidence fell to 42% in the fourth quarter of 2022, from 51% in the previous quarter. 

The retail trade sales numbers, and confidence levels, would likely have been better were it not for load shedding, which forces smaller retail outlets to cease trade for hours at a time while creating traffic snarl-ups that inconvenience shoppers. 

It would be interesting to see the retail sales data for candles, headlamps, flashlights, generators and solar panels. In these trying times, some niche sectors are no doubt shining brightly. DM/BM