By Ame Muller
Headline inflation eased to 4.3% year-on-year (y/y) in July from 5.0% in June, coming in slightly below our forecast of 4.4% and market consensus of 4.5%. Monthly pressure was 0.2% month-on-month (m/m), mainly driven by electricity and core inflation.
Core inflation ticked up slightly to 4.2% y/y, with monthly pressure of 0.5% m/m. Monthly pressure was led by water and services. Services inflation recorded 0.3% m/m and 5.0% y/y, while core goods inflation was 0.9% m/m and 1.6% y/y.
Average fuel prices declined by 7.8% m/m but were 20.6% higher than in July 2025.
Food and non-alcoholic beverages (NAB) inflation slowed to 0.9% y/y, from 1.6% previously, its lowest level in more than 16 years, and monthly pressure was -0.2%, mainly reflecting deflation in cereals, meat, and fruit and nuts.
Outlook
Updating our model with the latest data suggests that headline inflation will rise to 4.5% y/y in August, with higher fuel prices remaining the primary source of monthly pressure. However, food inflation continues to provide an important offset, as near-term food price pressures remain contained.
Looking ahead, the inflation outlook remains closely tied to developments in global oil markets and geopolitical tensions in the Middle East. While Brent crude oil prices have remained relatively stable, South Africa remains vulnerable to oil price shocks due to its reliance on imported fuel and road-based freight transport. Any further disruption to global supply could raise fuel, transport, and production costs, placing additional upward pressure on inflation and complicating the South African Reserve Bank's efforts to anchor inflation expectations around its 3% target.
The August inflation print is scheduled for release on 23 September. There are no major periodical surveys conducted in August, but any remaining utility increases (7.27% weight in CPI) may come through in the print.
