South African inflation sinks to 15-year low in April
South Africa’s consumer price growth fell in April to its lowest since 2005, as a lockdown to curb the spread of the coronavirus closed most shops and industries, strangling demand and spending.
South Africa’s COVID-19 infections exceeded 100,000 this week, with more than 2,000 deaths, just as government further eased restrictions in a bid to slow an economic free-fall.
Headline consumer inflation slowed to 3.0% year-on-year in April, its lowest in nearly 15 years, data from Statistics South Africa showed on Wednesday. Monthly prices swung into deflationary territory, down to -0.5% from a 0.35% increase in March.
On a year-on-year basis, only food prices saw an increase, albeit marginal. Transport prices fell 3.5%. Communications, clothing and restaurants and hotels also saw prices fall significantly.
Monthly inflation saw almost all the sectors in negative territory.
The slowdown to inflation comes even after 275 basis points of interest rate cuts by the central bank this year to ease pressure on consumers, signalling the start of a deflationary period for consumers and government as the economy stagnates.
“In the absence of reform, interest payments, and inefficient spending will tip S.A. into a deflationary debt spiral within the next five years,” economists at ETM Analytics said in a note.
Finance Minister Tito Mboweni delivers an emergency budget at 1300 GMT. He is expected to paint a bleak picture of the economy. – Reuters