South Africa

South Africa Inflation July 2023

South Africa: Inflation drops to two-year low in July

Inflation dropped to 4.7% in July, following June’s 5.4%. July’s result represented the lowest inflation rate since July 2021. Consequently, inflation moved closer to the midpoint of the South African Reserve Bank (SARB)’s 3.0–6.0% target band. Moreover, July’s result surprised markets; a Reuters poll predicted inflation to ease to 5.0%. Looking at the details of the release, the moderation was largely due to prices for food rising at a slower rate. Moreover, prices for transport declined 2.6% year on year, the steepest fall since June 2020. These developments more than offset prices for housing and utilities rising at a brisker pace.

Accordingly, the trend pointed down, with annual average inflation coming in at 6.8% in July (June: 7.0%). Meanwhile, core inflation fell to 4.7% in July from the previous month’s 5.0%.

Lastly, consumer prices increased 0.91% over the previous month in July, accelerating from June’s 0.18% rise. July’s uptick was the highest reading since March.

In June, inflation reentered the SARB’s target range for the first time since April 2022. This, coupled with July’s result, is taking pressure off the SARB to hike rates further following July’s pause. Consequently, our panel largely expects the tightening cycle to have peaked.

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