South Africa: Inflation drops to over three-year low in July
Inflation fell to 4.6% in July, following June’s 5.1%. July’s figure represented the weakest inflation rate since April 2021 and undershot market expectations, supporting the case for the South African Reserve Bank (SARB) to kick off its loosening cycle when it convenes next on 19 September. Looking at the details of the release, lower price pressures were recorded for transport, housing and utilities, plus food and non-alcoholic beverages.
Meanwhile, the trend was stable, with annual average inflation unchanged from June’s 5.3% in July. Meanwhile, core inflation edged down to 4.3% in July from the previous month’s 4.5%.
Finally, consumer prices increased 0.43% in July over the previous month, picking up from the 0.09% increase recorded in June. July’s result marked the highest reading since March.
Looking ahead, our panelists see inflation in August–September remaining close to current levels, before decelerating notably in Q4; restrictive monetary policy, a stronger rand, an elevated unemployment rate and a high base of comparison will drive this disinflation.
Overall in 2024, inflation will slow from 2023’s levels but will remain above the midpoint of the SARB’s 3.0–6.0% target range. Factors to watch include oil prices, the strength of the rand, changes in fiscal policy under the new administration, and the timing and pace of interest rate cuts. An upside risk is extreme weather.