South Africa’s reliance on imported fuel and road-based freight leaves transport and production costs vulnerable to global oil-price shocks, FNB Economics has warned.
Fuel prices declined by an average of 7.8% month on month in July but remained 20.6% higher than a year earlier, according to Statistics South Africa’s latest consumer price index data.
FNB said fuel prices were expected to remain the main source of monthly inflationary pressure in August.
Any further disruption to global oil supplies could raise fuel, transport and production costs, placing additional pressure on inflation, the bank said.
The inflation outlook remained closely linked to developments in global oil markets and geopolitical tensions in the Middle East, it added.
Although Brent crude prices had remained relatively stable, South Africa’s dependence on imported fuel increased its exposure to international supply disruptions and price volatility.
Headline consumer inflation eased to 4.3% year on year in July from 5% in June, according to Stats SA. The consumer price index increased by 0.2% month on month.
Food and non-alcoholic beverages inflation slowed to 0.9% year on year, its lowest level in more than 16 years. FNB said subdued food-price pressure was helping to offset higher transport costs.
The bank expects headline inflation to rise to 4.5% in August. Stats SA is scheduled to publish the August inflation figures on September 23.
