Modest Rise in Inflation Noted for April

In April, South Africa’s headline consumer inflation saw a slight uptick, rising to 2.8% year-on-year from 2.7% in March, according to the latest data from Stats SA. This small increase surpassed market expectations and was mainly fueled by a significant rise in food prices, especially in the meat sector.

Core inflation, which excludes volatile components such as food and fuel, fell to 3%, reaching its lowest level since July 2021. This drop signals a decrease in underlying inflationary pressures and a reduction in consumer demand.

Rand vs dollar

“This drop reflects a sustained reduction in underlying inflationary pressures within the local economy, highlighting a broader trend of subdued price changes in non-volatile goods and services,” noted Casey Sprake, economist at Anchor Capital.

The inflation data was affected by two opposing factors. On one hand, food and non-alcoholic beverage prices surged by 4%—the highest annual increase since September 2024. This rise was driven by significant increases in prices for meat, oils, sugar, and vegetables. Meat prices jumped by 3%, a sharp increase from just 0.4% in the previous month.

On the other hand, fuel prices continued their downward trend, with inland petrol and diesel prices falling to R21.62 and R21.94 per litre, respectively. Fuel costs dropped by 13.4% year-on-year, aided by falling global oil prices and a stabilizing rand.

However, the Reserve Bank is confronted with a tough policy decision at its Monetary Policy Committee meeting set for 29 May. Although the decline in core inflation supports arguments for lowering rates, global uncertainties and currency fluctuations present considerable risks.

Read: Rate cut on the cards?

“The MPC must weigh the positive inflation outlook against potential upward risks stemming from the volatile and unpredictable global environment,” states the economic team at Nebank.

While some analysts anticipate a 25 basis point rate cut, others believe the SARB will maintain current rates. Inflation is comfortably within the central bank’s target range of 3-6%, but trends in food prices and external shocks will be closely observed in the coming months.

Read: Rand surges after South Africa flags inflation-target change

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