Photo: Dwayne Senior/Bloomberg via Getty Images
South Africa’s annual inflation rate eased in July to 4.7%, down from 5.4% in June 2023, the lowest reading since August 2021, according to data from Statistics South Africa.
Inflation first dipped below the upper limit of the South African Reserve Bank’s 3% and 6% target range in June — its lowest level in 20 months.
The main contributors to the 4.7% annual inflation rate were food and non-alcoholic beverages, which increased by 9.9% year-on-year; housing and utilities, which increased by 5.1% year-on-year and miscellaneous goods and services, which increased by 6.3% year-on-year.
The consumer price index increased by 0.9% in July 2023.
Lara Hodes, an economist at Investec, projected inflation will have increased by 0.8% month-on-month, translating to 4.6% year-on-year.
“While the petrol price decreased, albeit modestly at the beginning of July, municipal electricity tariff increases were enforced during the month driving up inflation within the housing and utilities segment of the CPI basket. Specifically, the National Energy Regulator approved a municipal increase of 18.49%, effective 1 July 2023,” Hodes said.
She said while consumer food price inflation has eased, it still remains elevated at 11.1% year-on-year. Adverse weather conditions, owing to climate change and global food commodity price moves, remain a risk. Moreover, the highly volatile domestic currency remains an upside risk to inflation.
Nedbank economists forecasted that average consumer prices will increase by 1.3% month-on-month in July, mainly pushed up by seasonal price adjustments in some of the major categories.
Headline consumer inflation was forecasted to have continued to moderate, falling to 5.1% in July from 5.4% in June. The main driver of the monthly rise within “housing and utilities” will be electricity tariffs.
Earlier this year, the National Energy Regulator of South Africa authorised Eskom to increase its tariffs by an average of 18.65%. As a result, municipalities raised electricity tariffs by more than 18% from 1 July.