South African drought leads to CPI inflation

While economic times will likely remain challenging in 2017, consumers may see a slowing in food price inflation after the four year long drought has lessened, according to a recent report released by FNB.

"The drought was one of the largest influences on the current Consumer Price Index (CPI), leading to a severe impact on agricultural production and employment" said Household and Property sector strategist, John Loos.

While the agriculture sector’s recent weakness negatively impacted the economy and also employment, it is arguably in the area of consumer prices where its impact is felt strongest.

"There has been a lessened strain on the CPI due to the Food and Non-Alcoholic Beverages component’s large weighting of 15.4% of the overall CPI. It thus has the ability to continue to significantly influence the overall CPI rate" Loos continued.

As of November 2016, the Food and Non-Alcoholic Beverages CPI inflation rate accounted for 1.8 of a percentage point of the overall CPI inflation rate of 6.6% in that month, making it the largest single contributor to the overall CPI inflation rate.

source: businesstech.co.za

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