Report by Monika Kristof
Executive summary
- The annual inflation rate for December 2020 slowed down to 2.4% from 2.6% that was recorded for December 2019.See Figure 1.
- On average, the annual inflation rate for 2020 stood at 2.2%.
- The deceleration in the annual inflation between December 2019 and December 2020 emanated mainly from the categories of clothing and footwear, housing, water, electricity, gas and other fuels, hotels, cafes and restaurants, transport, education and recreation and culture categories. See figure 2.
- The category of clothing and footwear and housing, water, electricity, gas, and other fuels recorded a deflation throughout the year 2020.
- Despite the slowdown in the annual inflation rate, food and non-alcoholic beverages, alcoholic beverages and tobacco, communications, furnishings, household equipment and routine maintenance of the house and miscellaneous goods and services categories recorded an increase in the annual inflation rate. See figure 2.
Analysis
- The deflation recorded for the clothing and footwear category from (0.5 % to -6.0 %) was mainly influenced by the lack of demand for footwear.
- The decline in the annual inflation rate for the housing, water electricity gas and other fuels category from (1.9% to -1.3 %) was influenced by the decrease in the prices of rental payments for dwelling (both owners and renters), and in the prices of regular maintenance and repair of dwelling.
- The annual inflation rate for hotels, cafes, and restaurants declined from (4.1% to 0.1%), this was influenced by the lack of demand for Accommodation services.
- Transport category recorded a decline in the annual inflation rate from (2.0% to -1.3%), the slowdown was mainly influenced by the decline in the prices of car parts for personal transport and by the lack of demand for public transportation services.
- The decline in the annual inflation rate for the education category from (12.0% to 7.0%) was mainly due to price declines in the pre-primary education (ages 2 to 6 years) and tertiary education categories.
Outlook
- As the Covid-19 second wave hits, the stagnation in economic activities is expected to continue and the loss of incomes due to retrenchments and the closure of some businesses will lead to a lack of demand for goods and services and consequently cause a decline in the inflation rate.
- We project that the annual inflation rate for 2021 will remain within the South Africa inflation target of 3% and 6%.
Figure1: Annual inflation rate
Figure 2: Categorical analysis Year on Year %
