South Africa’s inflation rises to 4.4% as transport costs fuel price pressures

South Africa's inflation rate climbed to 4.4% in August from 4.3% in July, driven primarily by transport costs and housing utilities. Transport prices rose 8.8%, while housing and utilities increased 5.2%, and insurance and financial services climbed 5.7%. Food and non-alcoholic beverage costs rose only 1.1% year-on-year, with food increasing 0.7%.

Meat prices grew 1.5%, and fish and seafood prices surged 7.5%. Despite a slight 0.4% decrease, fuel prices remain 20% higher than a year earlier. Services inflation, encompassing areas like education and hairdressing, rose from 5% to 5.1%, while goods inflation decreased from 3.4% to 3.3%. Experts previously forecasted a 4.5% year-on-year inflation rate, with Investec economist Lara Hodes noting that August's petrol price drop by 52 cents per litre limited transport-related pressures.

Hodes also expected food and non-alcoholic beverage inflation to stay contained after further easing in July, attributing this to favorable harvests for cereal products. Inflation has been on an upward trend, except for a dip in July due to fuel-price cuts, while the South African economy contracted in the second quarter. Inflation expectations have been falling, which could reduce the need for higher rates.

The latest Bureau for Economic Research (BER) survey showed a stabilization or decline in inflation expectations across various measures. Households now anticipate 4.9% inflation over the next year, down from 6% previously, and a five-year outlook of 8.3%, down from 9.1%. Professional analysts predict 3.4% inflation for 2028 and 3.5% over five years, while trade unions forecast 3.9% inflation for 2028 and 4.3% over five years.

Overall, the BER's professional five-year inflation expectations dipped from 4.1% to 4% during the third quarter. Recently, Brent crude oil prices surpassed $106 a barrel due to global tensions, posing the risk of renewed inflationary pressure. However, oil prices have since dropped below $100 a barrel and are now trading just under $95.

The South African Reserve Bank's Monetary Policy Committee is expected to announce a 25 basis-point rate hike as part of its interest rate decision, a day earlier than usual due to a public holiday.