S.African inflation edges up 3.2% in January

South Africa has seen its urban consumer prices climb 3.2 per cent year-on-year in January, up from 3.0 per cent in December. Month-on-month, prices also saw a slight uptick of 0.3 per cent. To delve into what is driving this increase and its implications for households and businesses, Koketso Mano, Senior Economist at FNB, joined CNBC Africa to dissect the numbers. Mano explained that while inflation has inched up at the start of the year, the current rate of 3.2 per cent remains relatively low and falls within the South African Reserve Bank's inflation target range. However, he also highlighted that month-on-month pressures are building up due to irregular survey outcomes typical of the first quarter of the year. Although headline inflation is expected to hover around 3% in the first half of the year, pressure may intensify once base effects dissipate. Mano further noted that while prices are rising for consumers, the rate of acceleration has slowed compared to the post-pandemic period. Looking ahead, Mano expects compensation of employees to outpace inflation, which could provide a positive outlook for consumers in managing price increases. Additionally, Mano shared insights on the implications of other economic indicators on policy formulation. He emphasized the importance of monitoring demand-driven inflation, the pass-through effect on services inflation, and administered price inflation related to essential services such as electricity and water. Factors such as the global economic environment and policy decisions from the Federal Reserve could impact South Africa's monetary policy and inflation outlook. Moreover, Mano highlighted recent adjustments in the consumer price index basket and the reference period, indicating potential shifts in inflation expectations for 2024. The recalibration of item weights within the basket could influence future inflation trends. As South Africa navigates through these economic dynamics, stakeholders must remain vigilant to potential shifts in inflationary pressures and policy responses.