November consumer price inflation came in slightly below our expectations at 4.6% y/y and 0.1% m/m. While services inflation remains sticky at 5.5% y/y, goods inflation fell from 4.1% in October to 3.7% in November and core inflation softened further to 4.4%.
As grain and cereal inflation continues to contract, there was an encouraging moderation in meat inflation (from 15.5% y/y in October to 14.9% in November) in line with recent PPI prints, suggesting the peak of meat price inflation may be behind us. There was also a noticeable fall in the transport component from 5.4% to 4.4%, although this will likely be undone in the coming months on the back of a higher oil price.
Nersa’s pronouncement on Friday regarding the tariff increase granted to Eskom will have a bearing on the outlook for next year, although we believe CPI will be contained within the SARB’s target band for 2018. Today’s print is again indicative of very weak domestic demand, but doesn’t change our view that rates will remain flat for the bulk of 2018.