Relief: Inflation has eased to 4.6% year-on-year in July. This is the lowest since July 2021.
South Africa’s consumer inflation eased to 4.6% year-on-year in July, down from 5.1% in June, according to data released by Statistics South Africa on Wednesday.
This is the lowest it has been since July 2021, when the rate was also 4.6%.
Stats SA attributed the easing to lower annual rates for food and non-alcoholic beverages and transport, as well as housing and utilities. The annual inflation rate for food and non-alcoholic beverages dipped to 4.5% in July from 4.6% the previous month.
Food and non-alcoholic beverages inflation has trended down since its most recent high of 9% in November. It is at its lowest since September 2020, when it was 3.8%.
The price of fuel has a heavy bearing on inflation.
According to Stats SA, most categories in the transport group witnessed lower annual rates, including new and used vehicles, running costs and fuel. As a result, annual transport inflation softened to 4.2% in July from 5.5% in June.
Fuel prices receded for a second straight month, declining by 3.6% in July after a 4.6% decrease in June. The cost of 95-octane petrol in South Africa’s inland areas was 99 cents cheaper at R23.26 in July compared with June. The average price for diesel declined by 41 cents over the same period, from R23.76 to R23.35.
The Bureau for Economic Research had predicted CPI to slow to 4.9% year-on-year in July, and reach the 4.5% mid-point of the South African Reserve Bank’s (Sarb) 3-6% target band in September.
Nedbank economists also expected an easing to 4.9% year-on-year in the July print. The bank said the downward pressure would come primarily from transport costs, reflecting lower petrol prices. Added to this, food and beverages inflation would start to edge up off a lower base.
Lower inflation supports the case for the central bank to start lowering South Africa’s high interest rates next month. It hiked rates by a cumulative 475 basis points from late 2021 until May 2023, and has kept it unchanged at 8.25% since.
“We maintain our longstanding expectation that the Sarb will start to ease monetary policy from the next … meeting,” Standard Bank economist Shireen Darmalingam said.
The reserve bank holds its monetary policy committee meetings once every two months, and its next interest rate announcement is on 19 September.