The FNB House Price Index growth averaged 0.8% y/y in December, marginally higher than the 0.7% in November (revised from 0.5%), and a low of 0.5% in October.
Since the start of the interest rate hiking cycle in November 2021, interest rates have increased cumulatively by 475 basis points (bps), with the repo rate currently standing at 8.25% per year and the prime lending rate at 11.75%. This uptick has noticeably affected the portion of household income allocated to servicing debt, rising from an annualised nominal R312 billion in the fourth quarter of 2019 to R411 billion in the final quarter of 2023.
This week's data was mixed and reflects continued economic weakness in the first quarter, laden with uncertainty. The impact of tight monetary policy on demand for interest rate-sensitive spending, particularly new vehicle sales volumes, was evident. Additionally, the BER Manufacturing PMI indicated continued challenges faced by the manufacturing sector. Nonetheless, the outlook from market participants is encouragingly brighter.
After troughing at 2.1% y/y in May 2020, due to a lockdown-driven fall in demand and statistical imputations, headline inflation accelerated to 5.2% y/y in May of 2021. CPI weights are typically updated at least every five years, in line with international standards. New weights will be introduced with the January 2022 data and the base year will change to December 2020.
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