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South Africa: Inflation remains unchanged, below target as expected in May
Latest reading: Inflation was stable at April’s 2.8% in May, in line with market expectations. Inflation thus remained below the lower bound of the South Africa Reserve Bank (SARB)’s 3.0–6.0% target band for the third consecutive month. Beneath the stable headline rate, a faster increase in food and non-alcoholic beverage prices—which account for a little over 18% of the consumer price index basket— offset a sharper fall in transport costs.
Still, the trend pointed down mildly, with annual average inflation falling to 3.4% in May (April: 3.6%). Meanwhile, core inflation was unchanged at April’ 3.0% in May.
Finally, consumer prices rose 0.20% in May over the previous month, slowing down from April’s 0.30% rise. May’s result marked the weakest reading since December 2024.
Outlook: Our panelists see inflation edging slightly higher in June, hovering around the lower bound of the SARB’s target range. Later in the year, price pressures should trend further upward on the back of robust wage growth and a faster rise in private spending, nearing the target’s midpoint in Q4. Still, in 2025 as a whole, our Consensus is for inflation to ease from 2024’s average as a stronger rand contains imported cost pressures, and the effect of past interest rate hikes permeates through the real economy. Upside risks include extreme weather and mounting power cuts.
Panelist insight: Analysts at the EIU commented:
“After dipping to 4.4% in 2024, in line with our expectations, average inflation will continue to ease, but we believe that global tariffs will slow the pace of the reduction, with inflation projected to average 4% in 2025. This would be a considerable uptick after inflation of just 3% year on year in the first quarter. […] The uptick will be limited, however, as interest rates remain strongly positive and as strong retail competition obliges goods and services providers to absorb higher costs.”
