Inflation hits 7.8% – a level not seen since the global financial crisis

South Africa’s consumer price inflation ticked up to 7.8% year-on-year in July, as elevated petrol prices during the month took their toll on consumers.

Inflation has accelerated to its highest level since May 2009, when the headline rate was 8%. High inflation in 2008 and 2009 coincided with the global financial crisis. After 2009, inflation was anchored lower.

The global recovery from the Covid-19 pandemic — and the stubborn supply chain disruptions that have followed — has caused prices to soar.

July inflation was driven by higher transport costs, which increased by 25% year-on-year, and contributed 3.4 percentage points to the headline number. Food prices increased by 9.7% year-on-year and contributed 1.7 percentage points.

The inflation number was in line with consensus expectations, which took into account July’s petrol price hike. During that month, fuel prices rose by more than 10%, with the price of petrol going up by more than R2 a litre. 

International oil prices were above $100 a barrel at the start of the month. Crude futures have since declined amid global recession fears, prompting a fall in the domestic petrol price in August.

Petrol prices are expected to continue their descent in September as the rand strengthens and international oil prices slide.

“The expected decreases are good news for consumers who have been battered and bruised by these prices the past six months … While fuel is still more expensive now than it was at the beginning of the year, these forecast decreases do offer some relief,” the Automobile Association noted earlier this month.

The price of 93 unleaded petrol has increased by 29% since the beginning of this year.

Meanwhile, unions and other stakeholders are striking on Wednesday in protest over the increased cost of living.

In a statement released in advance of the national strike, labour federation Cosatu noted: “The higher fuel and electricity prices have worsened an already bad situation and are retarding economic recovery. They have weakened the workers’ buying power and eroded their wages in the context of unemployment and wage cuts.”

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