South Africa: Inflation rises less than expected in June
Latest reading: Inflation rose to the lower bound of the South African Reserve Bank (SARB)’s 3.0–6.0% target band in June, up from May’s 2.8%. June’s inflation rate was a four-month high, but still slightly undershot market expectations.
Looking at the details of the release, transportation prices fell at a more moderate pace in June compared to the previous month. Moreover, 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 15 months.
Still, the trend pointed down, with annual average inflation falling to 3.3% in June (May: 3.4%). Meanwhile, core inflation edged down to 2.9% in June from May’s 3.0%.
Finally, consumer prices rose 0.29% from the previous month in June, accelerating from May’s 0.20% rise.
Outlook: Our Consensus is for price pressures to pick up in Q3 and further in Q4. That said, inflation should remain below the midpoint of the SARB’s target range. This acceleration of inflation will reflect the ongoing recovery in purchasing power, which will in turn support private consumption growth.
Overall in 2025, our panelists see price pressures at a five-year low. Lower commodity prices and the stronger rand will keep a lid on imported inflation, and the past interest rate hikes will slow borrowing and investment. Upside risks include extreme weather, power cuts, commodity price spikes and faster-than-projected private spending growth.