By Koketso Mano
Consumer inflation softens at the start of 2026
Headline inflation slowed to 3.5% y/y in January from 3.6% in December. The print is higher than our forecast of 3.3% and the market expectation of 3.4%. Monthly pressure was 0.2%, mainly driven by core and food price pressures which were mitigated by lower fuel prices.
Core inflation lifted to 3.4%, from 3.3% previously, with monthly pressure of 0.3%. Services inflation recorded 0.2% m/m, and 4.2% y/y, led by restaurants and hotels as well as financial services. Core goods inflation was 0.5% m/m and 1.5% y/y, mainly driven by household contents and vehicles.
Average fuel prices fell by 3.4% m/m and were 3.7% lower than January 2025.
Food and NAB inflation remained unchanged at 4.4%. Average prices posted monthly pressure of 0.4%, which reflected upward pressure on meat and vegetables that was mitigated by contractions in cereal prices.
Outlook
Including this data in our model suggests that headline inflation will ease further in February, to around 3.2%, supported by fuel price cuts. However, there is an influx of infrequent survey outcomes over the first quarter of the year, which elevates core inflationary pressure, and this will be reflected over the next couple of prints. Nevertheless, headline inflation should remain contained and close to the 3% target over much of this year.
We also anticipate some push and pull factors within the consumer price basket. While a normalisation in services inflation is expected to continue, goods inflation should remain supportive of softer inflation. Despite the recent uptick in oil prices, we believe this reflects a higher risk premium related to the US-Iran tensions, and the market should eventually revert to fundamentals. The oil market is still expected to record a surplus and this will keep prices contained. In addition, slower import price inflation, coupled with a resilient rand, should support compression in other goods prices, which should extend across transport, food, and other discretionary items.
We think food inflation still presents volatility risk as biosecurity issues (Foot and Mouth disease and African Swine Fever) continue to impact the agricultural market. Fortunately, there are counterbalances, with softer cereal commodity prices expected to filter through to consumer costs alongside continued softness in vegetables.
The February inflation print is scheduled for release on 18 March. Major periodical surveys conducted in February include health services and insurance (6.98% weight in CPI).
