By Ame Muller
Headline inflation rose to 5.0% year-on-year (y/y) in June from 4.5% in May, exceeding our forecast of 4.8% and market consensus of 4.7%. Monthly pressure was 0.7% month-on-month (m/m), mainly driven by core inflation.
Core inflation lifted to 4.1% y/y, with monthly pressure of 0.6% m/m. Monthly pressure was driven by public transport and housing. Services inflation recorded 0.8% m/m and 5.2% y/y, while core goods inflation was -0.1% m/m and 1.6% y/y.
Average fuel prices slowed to 4.0% m/m and were 34.3% higher than in June 2025.
Food and NAB inflation slowed to 1.4% y/y, from 1.9% previously, and monthly pressure was 0.5%, mainly driven by vegetables as well as dairy and eggs.
Outlook
Our updated model, incorporating today's data suggests that headline inflation will slow to 4.4% y/y in July, with a 0.5% m/m increase driven mainly by higher utility and electricity costs. Meanwhile, inflation in most of the other categories is expected to remain relatively contained.
Looking further ahead, the inflation outlook remains a concern as disruptions in the Middle East continue to pose upside risks to fuel and headline inflation through higher energy prices. Encouragingly, oil prices have retreated from their recent highs, reducing some immediate pressure. Nevertheless, geopolitical uncertainty remains elevated, and the South African Reserve Bank (SARB) is unlikely to place much weight on what may prove to be a temporary easing in energy prices.
Against this backdrop, and the recent inflation expectations results that suggest that inflation shocks are beginning to influence medium- to longer-term inflation perceptions, we continue to expect a further 25-basis point (bp) increase in the repo rate at the upcoming Monetary Policy Committee meeting this week.
The July inflation print is scheduled for release on 19 August. Major periodical surveys conducted in July include utilities (7.27%), electricity (3.44%), funeral expenses and insurance (1.48%), communication services (subscription to satellite TV and streaming services, 0.54%), as well as home insurance (0.85%).
