South Africa: Inflation unexpectedly eases in August
Latest reading: Consumer prices were up 3.3% on a year-on-year basis in August, following a 3.5% rise in the previous month. August’s moderation took markets by surprise, as an acceleration had been priced in.
Relative to the prior month’s data, price pressures reduced for food and non-alcoholic beverages—which account for about a fifth of the consumer price index basket—in August (+5.2% in annual terms vs +5.7% in July). In contrast, price pressures were higher for transportation (-1.4% vs -1.7% in July). Finally, the variation in housing and utilities prices was unchanged from the prior month (+4.3% in August and July).
Meanwhile, core consumer prices rose 3.1% in annual terms in August, following a 3.0% rise a month earlier.
Finally, consumer prices fell 0.10% in August on a month-on-month basis, following a 0.88% rise in the previous month.
Outlook: Our Consensus is for average inflation to top Q3’s level in Q4, and stabilize there in H1 2026, before slightly easing in H2 2026.
Overall in 2025, inflation should still wane to a five-year low, tempered by a high base effect, past interest rate increases, a stronger rand and lower commodity prices. That said, our panelists expect inflation to overshoot the Central Bank’s newly preferred 3.0% inflation target during our forecast horizon through 2030. In the short term, the continued recovery in purchasing power will spur private consumption growth, fanning price pressures in turn. Upside risks stem from extreme weather, power cuts and commodity price spikes.