INFLATION accelerated drastically to 6.2% in January compared with a year ago, from 5.2% year on year in December as food prices spiked and the effects of a weaker rand on prices become more apparent, Statistics SA data showed on Wednesday.
Core inflation, which excludes food, non-alcoholic beverages, fuel and electricity prices, rose to 5.6% year on year from 5.2%.
This is the first time since August 2014 that inflation has breached the upper end of the 3%-6% target band.
Inflation increased by 0.8% month on month in January.
The R1.23c/l fall in the petrol price in January 2015 as well as in earlier months created a low base effect, without which the outcome for inflation in January 2016 would have been closer to 5.5% year on year, Investec chief economist Annabel Bishop said.
Data showed that the food and nonalcoholic beverages index increased from 5.9% year on year to 6.9% year on year in January. Food is rising due to production shortages caused by the drought.
The latest data justify the Reserve Bank’s 50 basis point rate hike in January to tame rising inflation. Rates were raised significantly despite concern from some sectors that it may further weaken economic growth.
Alcoholic beverages and tobacco increased from 6.6% year on year to 8.3% year on year in January.
The transport and recreation and culture indices rose sharply year on year.
Food and nonalcoholic beverages were also behind the rise in inflation during the month mainly due to higher fruit and vegetable prices.
In January, goods inflation rose by 6.5% year on year from 4.6% in December, while services inflation increased by 6% year on year from 5.7% in December.
The rise in services inflation reflected not only rand weakness, but also the growing inability of businesses to absorb these cost pressures, FNB senior industry economist Jason Muscat said.
“Food and transport costs in particular are driving the number higher, a trend we expect to continue given the drought, slightly higher oil prices and persistent currency weakness,” he said.
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