South Africa: Inflation accelerates to 10-month high in July
Latest reading: Inflation increased to 3.5% in July, above June’s 3.0%. July’s result was the highest inflation rate since September 2024 and roughly in line with market projections. Looking at the details of the release, price pressures for food and non-alcoholic beverages—which account for about a fifth of the consumer price index basket—rose at the fastest clip in 17 months, while transportation prices fell at a more moderate pace in July compared to the previous month. July’s result was the first one after the South African Reserve Bank (SARB) announced at its latest meeting on 31 July that it would now target inflation at the lower bound of its 3.0–6.0% target range, instead of the 4.5% midpoint.
Still, the trend pointed down, with annual average inflation falling to 3.2% in July (June: 3.3%). Meanwhile, core inflation ticked up to 3.0% in July from the previous month’s 2.9%.
Finally, consumer prices rose 0.88% from the previous month in July, accelerating from June’s 0.29% rise. July’s figure was the highest reading since February.
Outlook: Our Consensus is for inflation to hover close to July’s level in August–September and to accelerate through Q2 2026. The continued recovery in purchasing power—as wage growth outpaces inflation for a second year running in 2025—will fan private consumption growth, exerting upward pressure on inflation.
Overall in 2025, our panelists see inflation easing to a five-year low; a stronger rand and lower commodity prices will keep imported inflation at bay, while past interest rate hikes should temper borrowing and investment improvements.
Looking further ahead, our panelists see average inflation topping the SARB’s new preferred inflation target through our forecast horizon to 2029. Upside risks to the inflation outlook include extreme weather, power cuts, commodity price spikes and stronger-than-forecasted private consumption growth.