FNB head of agriculture information Jan van Zyl said during a briefing on agri-business on Wednesday that:
“There is pressure on the available production of agricultural commodities, which will over time translate into food inflation…Over time, food will unfortunately become more expensive.”
Along with these supply side effects that will tend to push prices higher, we must also factor in the Reserve Bank’s low interest rate policy that is translating to Rand weakness at present, which will push food prices even higher than they otherwise would’ve been.
Furthermore, the price inflation will not only be restricted to food prices. As I wrote on this blog in April 2012 and thereafter, the price inflation is right on schedule:
This means, that under the surface, price inflation is bubbling, and will rear its ugly head again toward year-end and going into 2013.
On the same day, I wrote
Following the increase of residential property prices comes more credit extension at the household level, higher retail sales, as well as a reallocation of capital toward the retail sector. That means price inflation momentum is higher looking into 2013.
In May I wrote
Our view still remains that following the surge of credit and money growth in h2 2011, the new money in the economy will make its way to the consumer level and result in a decline of demand to hold cash balances, and boost consumer spending and hence also consumer price inflation in the second half of the year.
…the 12% increase of money supply since May 2011, that is now beginning to work its way through to the consumer sectors, and you have an inflation cocktail that will be served in 2013.
In August, after discussing the strength of the listed property sector and what it means I wrote that
Next, however, comes the strength in the consumer sectors as this money works its way through the economy, as well as accelerating price inflation.
The coming price inflation in an environment where some 120,000 jobs have been shed since October 2012 means the standards of living of poor people will drop dramatically in coming months. Any guesses how these people will respond later in 2013?