South Africa’s inflation rises to 4.4% as transport costs fuel price pressures - IOL
Transport costs were the main driver behind higher inflation in August.
South Africa’s inflation rate edged higher to 4.4% in August from 4.3% in July, although consumer prices were unchanged during the month.
Statistics South Africa said the biggest contributors to annual inflation were housing and utilities, which increased 5.2%, and transport, which rose 8.8%. Insurance and financial services increased 5.7%.
Food and non-alcoholic beverages prices rose just 1.1% year-on-year, with food itself increasing 0.7%. The rate of increase in cereal products was 1.9% down than a year ago, while meat prices increased 1.5%. Fish and other seafood recorded a much larger 7.5% increase.
Transport remained one of the biggest sources of inflation despite prices falling 0.4% during August. Fuel prices dropped 1.3% during the month but were still 20% higher than a year earlier, while passenger transport services were 11.6% more expensive, Statistics South Africa noted.
Services inflation, which includes aspects such as education, accommodation, and hairdressers, increased from 5% to 5.1%, while goods inflation eased from 3.4% to 3.3%.
Ahead of the announcement, Investec economist Lara Hodes expected August inflation to come in at 4.5% year-on-year and 0.1% month-on-month.
The August petrol price fell by 52 cents a litre, limiting pressure from transport, while inflation in food and non-alcoholic beverages was expected to remain contained after easing further in July, said Hodes.
Hodes said meat prices had softened considerably, while cereal products had benefited from favourable harvests.
Inflation has been trending higher, apart from a dip in July to 4.3% following fuel-price cuts, while the South African economy contracted in the second quarter. At the same time, inflation expectations fell during the third quarter, potentially reducing the need for higher rates.
The latest Bureau for Economic Research (BER) inflation expectations survey showed expectations stabilising or falling across several measures.
Households’ expectations for inflation over the next year fell from 6% to 4.9%, while their five-year outlook declined from 9.1% to 8.3%.
Professional analysts expect inflation of 3.4% in 2028 and 3.5% over five years, while trade unions expect 3.9% in 2028 and 4.3% over five years. Overall, the BER’s measure of professional five-year inflation expectations eased from 4.1% to 4% in the third quarter.
Brent crude had recently climbed above $106 a barrel amid escalating global tensions, increasing the risk of renewed inflationary pressure. Over the past few days, however, oil has again dropped below $100 a barrel and was trading just below $95 earlier this morning.
The South African Reserve Bank’s (SARB’s) Monetary Policy Committee is mostly expected to announce a 25 basis-point hike this afternoon as it announces an interest rates decision a day earlier than usual due to tomorrow’s public holiday.
