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Business Recorder
an hour ago
- Business
- Business Recorder
Has Rs1.71/unit electricity relief vanished?
It was widely expected that the government would continue the Rs1.71 per unit electricity subsidy component—backed by the IMF staff-level agreement, which explicitly cited plans to fund the relief via additional Petroleum Levy collections. Yet, to the surprise of many, the subsidy appears to have quietly disappeared—if not formally withdrawn, then at least absent from the electricity bills issued for July 2025. Recall that the only component explicitly extended into FY26 was the Rs182 billion relief—equivalent to Rs1.71 per unit—for all non-lifeline consumers, financed through the enhanced Petroleum Levy. The government, in its communication with the IMF, had committed to maintaining this limited relief until June 30, 2026. Significant ambiguity now surrounds the fate of this relief and its continuity into FY26. The matter came up during Nepra's recent tariff hearing, but the Ministry of Energy's remarks did little to resolve the uncertainty. In its response, the Ministry noted that the 'average applicable consumer tariff in July 2025 would be lower by around seven rupees compared to July 2024.' While ostensibly reassuring, the phrasing raises more questions than it answers. No assumptions were disclosed, nor was it clarified whether the comparison referred to gross billing or adjustments embedded within the base tariff trajectory. With the Rs1.71 per unit subsidy now seemingly off the table, the month-on-month increase in tariffs for non-lifeline protected consumers—who account for the bulk of domestic electricity consumption—exceeds 30 percent. Previously, under the assumption of subsidy continuity, first and second protected slabs were projected to rise by 11 and 9 percent, respectively. They now stand to increase by 35 and 26 percent, respectively. Among non-protected slabs, effective tariffs for the first three categories are slated to rise by 12, 9, and 8 percent month-on-month. This development implies that effective tariffs in July may be materially higher than assumed—at odds with both prior policy signalling and the inflation projections built on that premise. Whether this reflects a temporary lapse awaiting formal notification, an oversight in tariff design, or a quiet policy reversal is yet to be clarified. What is clear, however, is that this shift—if sustained—has real implications that one hopes the Pakistan Bureau of Statistics (PBS) appropriately incorporates any change in effective tariffs into its CPI computation, lest the official inflation trajectory miss a key price signal affecting millions.
Daily Maverick
6 hours ago
- Business
- Daily Maverick
Beef continues to drive food inflation higher
Beef, fruit and vegetables are edging higher, leaving lower-income households with tough decisions to ensure tummies are full. The annual rate for food & non-alcoholic beverages (NAB) reached a 15-month high of 5.1% in June, Statistics SA revealed in the Consumer Price Index report released on Wednesday, 23 July 2025. 'Meat, particularly beef, continues to be the main driver of food inflation. Beef prices spiked for a third successive month, with high annual and monthly increases recorded for stewing beef, mince and steak. Stewing beef rose by an annual 21.2%, the fastest pace on record since the current CPI series began in January 2017.' Maverick Citizen has been tracking the prices of 14 basic food items that a consumer can buy using R370, the amount of the Social Relief of Distress (SRD) grant. The food basket hovers above R400, making it unaffordable for those who receive the grant as their only source of income. In our food basket, starches such as rice, flour and mealie meal decreased slightly, which might have given relief, but was countered by the higher prices of beef, fruit and vegetables. Higher electricity tariffs also struck in June. 'Other unprocessed food items also saw an uptick. The annual rates for fruits and nuts, and vegetables, remained in double-digit territory for a second straight month. Products that witnessed sharp price increases in the 12 months to June include beetroot, lettuce and carrots. Peanuts, however, were slightly cheaper,' the report reads. 'Inflation cooled across several food & NAB categories. Lower prices for white rice, hot cereals and cold cereals softened the annual rate for the cereal products category. Although maize meal continues to register high annual increases, the monthly change in June was 0.4%, the lowest since November 2024 (-0.1%),' the report said. Many dairy products are cheaper than a year ago, but higher from month to month. Lower prices were recorded for fresh full-cream milk and fresh low-fat milk, and eggs. These decreases helped pull the milk, other dairy products and eggs index down into lower prices. In the household Affordability Index food basket, the price of 44 essential items costs more than R6,000, while the average cost of the foods prioritised and bought first in the household food basket decreased by R27.25 from R2,955.34 in May 2025 to R2,928.09 in June 2025. But people are paying R83.87 (2.9%) more this year than they were in June 2024 for the same food basket. This is particularly hard on grant recipients and workers on minimum wage. The report says the implications are malnutrition and hunger, as families navigate the costs of food and their other primary bills. 'When the prices of core foods increase, there is less money to secure other important, mostly nutritionally rich foods, which are essential for health and well-being and strong immune systems (meat, eggs and dairy, which are critical for protein, iron and calcium; vegetables and fruit which are critical for vitamins, minerals and fibre; and maas, peanut butter and pilchards, good fats, protein and calcium, essential for children,' the report reads. 'The data shows that the core foods contribute 54% of the total cost of the Household Food Basket. At an average cost of R2,928.09 in June 2025, these foods are relatively very expensive in relation to the total money available in the household purse to secure food. These foods must be bought regardless of price escalations,' the report says. The report plays out multiple minimum wage scenarios, considering transport and electricity, and other basics people prioritise. 'The maximum wage of R4,606.40 in June 2025, when disbursed in a family of four persons, is R1,151.60. This is below the upper-bound poverty line of R1,634 per capita per month. Set at such a low level, the National Minimum Wage] works to institutionalise the low-baseline wage regime and lock millions of workers into poverty.' The report states that lack of wage raises, or raises that do not keep up with inflation, leave workers poorer each year and unable to keep up with price rises. 'The minimum shortfall on food for a family is 48.5% in June 2025. After paying for transport and electricity, workers are left with R1,963.43. If all of this money went to food, [for] the family of four, it would provide R490.85 per person per month. The Food Poverty Line is R796 per person per month,' the index reads. DM
Daily Maverick
6 hours ago
- Business
- Daily Maverick
CPI inches up to 3% as meat prices continue to push up food inflation
South Africa's inflation inched up to 3% in June while meat and vegetable prices added strain to household budgets. South Africa's consumer price index (CPI) accelerated to a 3% year-on-year increase in June, up from 2.8% in May. While the increase is modest and still comfortably at the rock bottom end of the South African Reserve Bank's (SARB) 3% to 6% target range, it underscores the strain of rising food prices, especially meat. This marks the first increase after two months of stability and comes ahead of the SARB's Monetary Policy Committee (MPC) meeting on 31 July 2025, where the prospect of a rate cut remains in focus. Food costs climb Food prices climbed to a 4.7% year-on-year increase in June, up from a 4.4% increase in May. 'Meat — particularly beef — continues to be the main driver of food inflation. Beef prices spiked for a third successive month, with high annual and monthly increases recorded for stewing beef, mince and steak,' Statistics South Africa (Stats SA) said. Stewing beef prices alone rose by an annual 21.2%, the fastest pace on record since the current CPI series began in January 2017. Why are meat prices so high? Wandile Sihlobo, chief economist at the Agricultural Business Chamber, said the surge was driven by two shocks, both easing now. First, an avian flu outbreak in Brazil led South Africa to halt poultry imports from that country, causing panic in the market, he said. Those restrictions had since been lifted, and imports should recover soon. Second, an outbreak of foot-and-mouth disease hit South Africa's beef sector, triggering concerns about supply and panic buying, Sihlobo noted. 'Slaughtering has now resumed in the major feedlots, and we are seeing some easing in red meat prices, which should be reflected in the inflation figures of the coming months.' He added that temporary export restrictions during disease outbreaks eventually increased domestic meat supply, which should further ease prices. Fruits and vegetables also climb Other food categories also saw steep increases, with fruits and nuts up 13.2% and vegetables up 13.6% annually for the second consecutive month. Items such as beetroot, lettuce and carrots saw sharp price increases, while peanuts were slightly cheaper. 'We also view the recent increases in vegetable prices as a temporary blip due to weather issues, and expect supplies of various vegetable products to recover significantly in the second half of the year,' Sihlobo said. Some relief in the trolley Not everything is pricier. Cereal prices cooled in June, helped by cheaper white rice and hot cereals. Dairy also provided some relief. 'Several dairy products are also cheaper than a year ago. Lower prices were recorded for fresh full-cream milk, fresh low-fat milk and eggs,' Stats SA said. Even maize meal, a staple that has seen persistent increases, slowed to a monthly change of 0.4% in June, the lowest since November 2024. Fuel keeps a lid on inflation According to Stats SA, fuel is on average 11.2% cheaper than a year ago. Although still significant, this decline is less steep than May's 14.9% year-on-year drop. 'The fuel price fell by a marginal 5c per litre, essentially not contributing to the inflation outcome, and supporting the low nature of inflation in the second quarter of the year, along with weak economic demand,' Annabel Bishop, the chief economist at Investec, said in a CPI update. The transport category shaved 0.5 percentage points off headline CPI in June, said Stats SA, offsetting some of the upwards pressure from the food category. What this means for you Rising meat prices are making weekend braais more expensive, although this may change in the months ahead. Higher prices for staples like carrots and lettuce are stretching grocery budgets. Cheaper milk, eggs and cereal provide a small offset. If the SARB cuts interest rates, loan and credit repayments could get cheaper. Prices are rising at a slower pace than last year, meaning wages may stretch further. Food price increases are anticipated to be temporary, so as local supply improves, expect some easing in the coming months. How inflation hits your budget For now, inflation remains low by historical standards, but rising food and meat prices are hitting household budgets. With inflation still at the lower end of the SARB's range, economists argue that the bank has room to cut rates. 'Such low inflation provides considerable support for consumers given that most wage increases are higher than this low prevailing rate of inflation. It also, arguably, supports the case for the Reserve Bank to cut interest rates further,' said Dr Elna Moolman, Standard Bank's head of macroeconomic research in South Africa. Relief ahead for food prices Despite the June spike, the trend of rising food prices looks set to moderate. 'We expect food price inflation to moderate in the coming months, as the benefits of ample domestic grains and an expected decent fruit harvest continue to enter the market. We also believe that the worries about meat prices will ease soon as supplies recover,' Sihlobo said. Investec forecasts CPI climbing slightly in the second half of the year due to base effects, potentially reaching 4% by year's end, but still 'reasonably benign'. The bank expects at least one more rate cut this year and possibly another in 2026. DM
Yahoo
7 hours ago
- Business
- Yahoo
‘Goldilocks' is ignoring the three bears, Wall Street analysts say
Markets are mostly maintaining their all-time highs despite Trump's tariffs, threats to Fed independence, and analysts reducing their expectations for U.S. GDP growth. Investors are instead enjoying a 'Goldilocks scenario,' Goldman Sachs says. Barclays agrees: 'Another week, another tariff salvo, and another market shrug.' S&P 500 futures are barely moving this morning after the index itself hit an all-time high yesterday, poking its head above 6,300 for the first time ever and closing at 6,305.6. In Asia and Europe, there was a small amount of profit-taking earlier today but nothing to be concerned about—equities remain mostly near their record peaks globally. There is no excuse for this behavior, arguably. There are three bearish indicators that ought to be scaring investors right now: The U.S. is imposing a trade tax on the entire planet; President Trump has threatened the independence of the Federal Reserve; and Goldman Sachs just moved down its forecast for U.S. GDP in the second half of the year (to 1.1%). But, as Goldman's Christian Mueller-Glissmann told clients in a recent note seen by Fortune, the markets appear to be ignoring this and enjoying a 'Goldilocks scenario' instead. 'Another week, another tariff salvo, and another market shrug,' Barclays analyst Christian Keller et al. told their clients. 'Resilient US consumer data and robust Q2 earnings for now dominate over initial signs of tariff effects on CPI, continuing threats of tariff escalations and increasing political pressures on the Fed.' There are reasons to worry that stocks might be overpriced. Deutsche Bank's Henry Allen pointed out recently that the Fed Funds futures speculators are betting in a way that suggests they expect an upcoming recession. 'If we look at Fed funds futures as of last night's close, we can see that just over 100bps of cuts are priced in over the next year to August 2026. That comes on top of 100bps already delivered between Sep-Dec 2024. So, if realised, that would be just over 200bps of cuts in two years. But historically, getting 200bps of cuts in two years has almost always required a recession,' he wrote in a research note. Maybe. It's worth remembering that the Fed Funds futures market changes daily, sometimes moving quite dramatically. These investors may not literally be pricing in a recession. But they are certainly betting that Fed Chair Jerome Powell will deliver cuts to interest rates sooner or later. More cheap money is good for stocks, and that's what stocks seem to be reflecting right now. Here's a snapshot of the action prior to the opening bell in New York: S&P 500 futures were off 0.13% this morning after the index hit a new high, at 6,305.60, up 0.14% yesterday. The S&P has never been above 6,300 before. The UK's FTSE 100 was clinging on above 9,000, at 9,008.61 in early trading. STOXX Europe 600 was down 0.44% in early trading. Japan's Nikkei 225 was down 0.11%. China's CSI 300 Index was up 0.8%. Bitcoin is still above $118K. This story was originally featured on
IOL News
7 hours ago
- Business
- IOL News
Sarb poised for rates cut despite inflation tickin up to 4-month high
Stats SA chief director of price statistics, Patrick Kelly, said the annual rate for food and non-alcoholic beverages has notably surged to a 15-month high of 5.1%, with meat prices—especially beef—being the primary culprit behind this uptick. Image: Simphiwe Mbokazi/Independent Newspapers The South African Reserve Bank (Sarb) may once again loosen its monetary policy before the year draws to a close despite recent data revealing an uptick in consumer price inflation. This comes as the Sarb's Monetary Policy Committee (MPC) will announce its decision on the policy rate next week after cutting the repo rate by 25 basis points to 7.25% per annum in May. Data from Statistics South Africa (Stats SA) on Wednesday showed that the headline consumer price index (CPI) edged higher to 3.0% in June after holding steady at 2.8% in April and May. This was the 11th consecutive month in which inflation remained below the 4.5% midpoint of the Sarb's 3-6% target range. Stats SA chief director of price statistics, Patrick Kelly, said the annual rate for food and non-alcoholic beverages has notably surged to a 15-month high of 5.1%, with meat prices—especially beef—being the primary culprit behind this uptick. The price of beef significantly rose on the back of the food and mouth disease outbreak in meat producing provinces, reducing the supply of red meat more than the demand in the market. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading "Meat – particularly beef – continues to be the main driver of food inflation," Kelly said. "Beef prices spiked for a third successive month, with high annual and monthly increases recorded for stewing beef, mince and steak. Stewing beef rose by an annual 21.2%, the fastest pace on record since the current CPI series began in January 2017." Analysts are closely watching the Sarb's next moves as they navigate the complexities of a fluctuating economic landscape. Dr Elna Moolman, Standard Bank Group head of South Africa Macroeconomic Research, said consumer inflation re-entered the Sarb's target range again in June after falling below the 3-6% target range for three consecutive months. 'Such low inflation provides considerable support for consumers, given that most wage increases are higher than this low prevailing rate of inflation. It also arguably supports the case for the Reserve Bank to cut interest rates further at the upcoming MPC meeting next week,'Moolman said. 'We do expect inflation to continue trending higher in the coming months, but it should remain reasonably benign.' On a monthly basis, the CPI increased 0.3% following a 0.2% rise in May. Meanwhile, the annual core inflation rate edged down to 2.9% in June, the lowest since April 2021, from 3% in each of the previous two months. David Omojomolo, Africa economist at Capital Economics, noted that the slowdown in core inflation has set a favourable backdrop for potential interest rate cuts, reinforcing the Sarb's stance against excessive underlying price pressures. Omojomolo projects considerable relief for consumers, forecasting further cuts by year-end 'We expect rates to be lowered by more than most currently anticipate by the end of next year. The outturn was a touch stronger than our forecast that inflation would stay unchanged at 2.9% year-on-year, but in line with the LSEG consensus,' Omojomolo said. 'We expect a 25 basis points cut to 7.00% at the MPC meeting next week. And we think the Sarb will cut interest rates by another 125 basis points to 5.75% by end-26, further than most expect – even if the inflation target is lowered.' In a recent statement, Sarb Governor Lesetja Kganyago hinted at a potential shift in the bank's inflation target, considering a lower objective of 3% in light of internal and external analyses indicating that its current target may be unusually high. Nedbank economist Busisiwe Nkonki fforesees ongoing upward pressure on inflation during the second half of the year, primarily driven by food and fuel costs. The ongoing foot-and-mouth disease outbreak is expected to result in soaring meat prices, compounded by unpredictable geopolitical developments impacting the global price of Brent crude oil. 'We believe that the benign inflation outlook and muted domestic demand, amongst other factors, will convince the MPC to cut interest rates by 25 basis points next week,'she said. 'However, the MPC's decision will also be influenced by the US Fed's decision in the same week. Therefore, there is a chance that the MPC could delay the cut to September.' BUSINESS REPORT
