South Africa's inflation rises slightly, but food prices ease
Food inflation eases slightly.
Image: Freepik
In an environment of cooling food price increases, South Africa’s headline inflation still ticked up in September – coming in exactly in line with economists’ expectations.
Food prices, which have been a key driver of inflation in recent months, showed signs of easing, helping to temper overall price growth.
Economists had anticipated a marginal increase from 3.3% in August to 3.4% in September, and that’s precisely where the figure landed.
Food inflation eased to around 4.8% from 5.2% the previous month, driven by softer meat and grain prices.
Investec economist Lara Hodes said CPI inflation rose by 0.2% month-on-month in September, bringing the annual reading to 3.4%. “The monthly increase stemmed from the housing and utilities and restaurants and accommodation services’ components of the CPI basket.”
Fuel prices had little effect, with only a 4 cent per litre drop in September and a similarly negligible change in early October.
Food price inflation, a major component of the CPI basket, eased notably to 4.4% year-on-year from 5.2% previously, in line with global agricultural commodity movements and a rand that appreciated 1.5% over the month.
Within the basket, meat prices rose modestly, constrained by foot-and-mouth disease, while cereal products remained steady at 1.6% year-on-year.
Agbiz notes that South Africa’s 2024-25 summer grain and oilseed harvest is projected to have risen over 25% year-on-year, supported by good rains and plantings.
Core inflation, which strips out food, fuel, and energy costs, nudged up to 3.2% from 3.1% in August.
Dr Elna Moolman, head of South Africa macroeconomic research at Standard Bank, said that “core inflation…was marginally higher than expected at 3.2% year-on-year in September from 3.1% in August.”
Marginal differences relative to expectations came from food prices, which declined 0.4% relative to the previous month, said Moolman. This was “counteracted by an acceleration in rental inflation, which, while higher, still remains relatively low”.
While inflation is above the Reserve Bank’s 3% trend target, it remains lower than aggregate income growth. Moolman noted this supports consumers, with real income expansion helping spending power.
The slight uptick suggests the central bank is unlikely to move interest rates until 2027, as it aims to anchor inflation and expectations near the bottom of the 3% to 6% target range, said an economist.
National Treasury is expected to set an official 3% target in the November Medium-Term Budget Policy Statement.
Koketso Mano, FNB senior economist, said headline inflation could lift to 3.8% year-on-year in October. “This will reflect the hike in average fuel prices, which will push the year-on-year number out of deflationary territory,” she said.
In addition, seasonal food price pressures could compound the upward pressure to headline inflation,” said Mano.
“That said, headline inflation should remain below 4% over the next year bar any negative shocks. Inflation has remained benign this year, occasionally surprising the market to the downside,” she said.
For now, South Africans can breathe a little easier as food prices cool and borrowing costs remain steady – but subtle pressures in housing and services hint that careful monitoring is still needed.
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