The BER’s Survey of Inflation Expectations for the first quarter of 2026 released on Monday shows that the average five-year inflation expectation among analysts, business leaders and trade union officials declined slightly to 3.6%, down from 3.7% in the previous quarter.
Image: Ayanda Ndamane/ Independent Newspapers.
Inflation expectations among economists, businesses and trade unions have declined to record lows in South Africa, signalling growing confidence that price pressures may remain contained in the medium term, according to the latest survey released by the Bureau for Economic Research (BER).
However, the survey also revealed that households remain significantly more concerned about rising prices, highlighting a persistent gap between professional forecasts and consumer perceptions of inflation.
As the survey was conducted in early March, researchers noted that the results may not fully reflect the impact of recent developments in global oil markets and the weakening of the rand following escalating geopolitical tensions earlier in the year.
The BER’s Survey of Inflation Expectations for the first quarter of 2026 released on Monday shows that the average five-year inflation expectation among analysts, business leaders and trade union officials declined slightly to 3.6%, down from 3.7% in the previous quarter.
Although the drop was marginal, it marks the lowest level recorded since the survey began tracking long-term expectations.
Analysts were the most optimistic group, expecting inflation to average around 3.2% over the next five years. Business executives forecast inflation at about 4.0%, while trade union officials projected a rate of roughly 3.7%.
The three professional groups broadly expect inflation to remain stable in the near term, forecasting headline consumer price inflation of about 3.6% in 2026 and 2027. This represents a downward revision compared with earlier expectations of about 3.8% for 2026 recorded in the previous survey.
The survey results come after South Africa adjusted its inflation target to 3%, with the current survey representing the second round conducted under the revised target framework.
Despite the improved outlook among professionals, household expectations paint a more cautious picture. Consumers surveyed expect prices to rise by about 5.4% over the next 12 months, a slight increase from the 5.3% recorded in the previous survey.
Household inflation expectations over a five-year horizon also increased significantly, rising to 8.4% from 7.7% previously. Researchers said this reversal suggests that the downward trend in household inflation expectations may have bottomed out.
The data also showed differences across income groups. While high-income households became slightly more optimistic about future inflation, expectations among low-income households rose noticeably.
Lower-income households expect inflation of about 6.2% over the next year, compared with around 4.8% among high-income households.
Economists often view inflation expectations as a key indicator for monetary policy because they influence wage negotiations, consumer spending behaviour and investment decisions.
If households and businesses expect prices to rise rapidly, they may demand higher wages and adjust prices accordingly, potentially reinforcing inflationary pressures. In addition to inflation forecasts, the survey also captured expectations for several other key economic indicators.
Respondents expect wages to rise by an average of 4.7% in 2026, a forecast that remains unchanged from the previous quarter. Analysts expect slightly lower wage growth, close to 4%, while trade unions anticipate increases slightly above 5%. Business managers forecast wage growth of just under 5%.
Economic growth expectations also improved slightly. The three professional groups now anticipate South Africa’s economy to expand by about 1.5% in 2026, up from a previous forecast of 1.3%.
Growth is expected to accelerate modestly to around 1.7% in 2027. Analysts are the most optimistic, projecting economic growth of about 1.7% this year and 1.9% next year.
Respondents also revised their currency outlook. The survey indicated that the rand is expected to trade at approximately R16.24 to the US dollar by the end of 2026, which is stronger than previously anticipated.
By the end of 2027, the currency is expected to weaken slightly to around R16.49 per dollar.
Meanwhile, expectations for interest rates suggest limited changes in the near term. Survey participants expect the prime overdraft rate to fall modestly to about 10% by the end of 2026, implying only one 25-basis-point cut this year. A further reduction to about 9.5% is expected in 2027.
Nevertheless, the survey suggests that while professional forecasters are increasingly confident inflation will remain close to target levels, households remain wary that price pressures could still affect their cost of living in the years ahead.
BUSINESS REPORT