Food and petrol prices may finally be coming down.

New updates from South Africa's Central Energy Fund show what could be a well-needed reprieve from the skyrocketing food and petrol prices we have suffered through in 2022. In fact, petrol prices have come down today.

Good news for South Africans reeling from inflation as recent data from Stats SA emerges. The findings show that inflation has reached an almost 13-year high at a staggering 7.8%. While these statistics came as no surprise to the Bureau of Economic Research (BER), what is worth noting is that perhaps the largest contributing factor to the inflation hike is the fuel prices - up a staggering 53% from last year.

These sentiments are also echoed by Nedbank's economists, who largely agree that inflation has reached its peak and will likely start to plateau and dip in the following months.

Food Price Drop and why

According to an analysis from the Pietermaritzburg Economic Justice and Dignity Group, food prices have also started to reach their peak. Prices are expected to become more moderate. The group also noted that the food price increase in August was up only a marginal 0.6% from previous months.

The group has set out three different scenarios for the food price inflation decrease we hope to expect:

Scenario One - the worldwide grain supply shock persists, forcing global food price inflation for the year to 6.5%. This ultimately affects the price of meat and will be recorded at a scale of a 10% increase in costs.

Scenario Two - Favourable conditions for local grain supply will moderate the overall price, which will only see a 5.5% increase in overall costs.

Scenario Three - Global production will start easing, which will provide a boost for grain stocks. Food inflation will scale to a moderate 5% and eventually start dipping into the Reserves Bank's preferred target of 3%

In essence, and should one of the scenarios play out, the annual cost of feeding a reasonably sized family will show an inflation level from 4.9% or 7.4% based on worst to best-case scenarios.

Petrol price drop and why

Effectively, petrol prices will be dropping today by a sizable R2.04 while diesel prices will cut by 78 cents. Still a far cry from reasonable, but no longer above the cartoonish price of R25+.

Contributing factors to this include a stronger Rand off the back of a weakening Euro as well as a global dip in oil share prices. While the economy will remain subjected to a pressure cooker environment, it is likely to remain resilient within the following months.

While it is always good to remain cautiously optimistic about said decreases, one must always bear in mind that such forecasts are based on current trajectories. Any tip in the scale could cause the prices to once again skyrocket. We encourage all our readers to remain cautious and manage their budgets accordingly.

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