South Africa: Inflation picks up in May from April
Latest reading: Consumer prices rose 4.5% on a year-on-year basis in May, following a 4.0% increase in the previous month. May’s reading was the strongest since July 2024 and exceeded the 2.0%–4.0% target of the South African Reserve Bank (SARB) but still surprised markets to the downside.
Relative to the prior month’s data, there were higher price pressures for housing and utilities (+5.3% in annual terms vs +5.2% in April) and transportation (+9.4% vs +4.9% in April). In contrast, price pressures for food and non-alcoholic beverages eased in May (+1.9% vs +2.9% in April).
Meanwhile, core consumer prices rose 3.8% in annual terms in May, following a 3.6% rise in the previous month.
Finally, consumer prices increased 0.66% in May in month-on-month terms, following a 1.15% increase in the prior month.
Outlook: Our Consensus is for average inflation to rise above 2025 in 2026 and hover around the target ceiling, amid the Iran energy shock. Meanwhile, the latest SARB survey indicated that inflation expectations for this year, as well as for 2027 and 2028, rose sharply in Q2. Expectations for 2026 now stand at 4.4%, up from 3.6% in the previous survey and above the upper bound of the SARB’s inflation target. The rise in inflation expectations could weaken the transmission of the recent 25 basis point hike—the first in three years—by increasing the risk of second-round effects.