Statistics South Africa (Stats SA) yesterday said the July inflation print was the lowest in three years since July, 2021 when the rate was also 4.6%, largely driven by slowing food and non-alcoholic beverages (NAB) prices. Picture: Ayanda Ndamane/Independent Newspapers
Christmas might come a little early this year for financially-constrained South African consumers in the form of interest rates cut, the first one in four years, after consumer prices fell to a three-year low year on year in July.
This comes as the consumer price inflation (CPI) sank below 5% in July, slowing to 4.6% in July from 5.1% in June, after holding steady for 10 months in the 5% to 6% range.
The latest CPI figures confirm that inflation is steadily winding down and settling around the 4.5% midpoint of the SA Reserve Bank’s (Sarb) inflation target range of 3-6%.
Statistics South Africa (Stats SA) yesterday said the July inflation print was the lowest in three years since July, 2021 when the rate was also 4.6%, largely driven by slowing food and non-alcoholic beverages (NAB) prices.
Stats SA’s chief director of price statistics, Patrick Kelly, said the annual rate for food and NAB was 4.5% in July, down from 4.6% in June, registering a slowing inflation trend since its most recent high of 9.0% in November, 2023 and is currently at its lowest since September, 2020 when it was 3.8%.
Kelly also said most categories in the transport group, except for public transport, witnessed lower annual rates as fuel prices declined for a second consecutive month in July.
“While overall food inflation has slowed, bread and cereals are showing an upwards momentum. The category recorded an annual increase of 5.6% in July, up from June’s 5.2%,” Kelly said.
“Fuel prices receded for a second straight month, declining by 3.6% in July. This followed a 4.6% decrease in June. Inland 95-octane petrol was 99c cheaper, falling from R24.25 in June to R23.26 in July. The average price for diesel declined by 41 cents over the same period from R23.76 to R23.35.”
On a monthly basis, consumer inflation was 0.4%, higher than the 0.1% rise recorded between May and June.
Nedbank economist Johannes (Matimba) Khosa said the faster moderation in inflation was encouraging, as it will ease the strain on household disposable income.
“We now expect inflation to fall below the 4.5% Sarb’s target in September (from October previously), and average 4.8% for the year from 4.9%. The downwards trend will primarily come from fuel and food prices,” Khosa said.
“We believe that the lower inflation trajectory and the start of the cutting cycle in the major economies will prompt Sarb to start reducing interest rates by 25 basis points in September, followed by another cut of the same margin in November, taking the prime rate to 11.25% by the end of 2024. More cuts totalling 75 basis points will follow in 2025, taking the prime rate to 10.50% at the end of the year,” Khosa said.
Trade union Uasa spokesperson, Abigail Moyo, also agreed that a potential rate cut by the Sarb may wink around the corner.
Moyo said Uasa believed consumers may soon enjoy more disposable income with an increased affordability standard, with such hope for further reduced pressure on food and essential services.
“As we always ask government, stakeholders, and policymakers to consider the needs of fellow citizens when pricing and implementing tariffs on several services, we believe such alignments and reliefs are crucial to alleviating the painful reality for many poverty-stricken citizens.
“Uasa hopes that the current cool-down trend in the CPI and fuel prices continues to help consumers with financial relief during the remainder of the year and into the festive season.”
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