The consumer price index decreased by 0.1% month-on-month in August, after increasing by 0.9% in July.
South Africa’s annual consumer inflation eased to 3.3% in August, from 3.5% the previous month, on the back of decreases in goods and services, Statistics South Africa said on Wednesday.
The consumer price index (CPI) decreased by 0.1% month-on-month in August, after increasing by 0.9% in July.
The biggest contributors to the year-on-year price growth were housing and utilities at 4.3%, contributing 1.0 percentage points to the headline number, as well as food and non-alcoholic beverages, which came in at 5.2%, contributing 0.9 percentage points.
Inflation in goods eased slightly to 3.1% from 3.2%, while services held steady at 3.6%, the statistics agency said.
The August print comes a day before the South African Reserve Bank’s monetary policy committee announces its decision on the benchmark repurchase rate, which economists expect to remain unchanged at 7%.
The Reserve Bank has indicated that it is aiming for a lower inflation target of 3% after previously focusing on 4.5%, the midpoint of its 3-6% target band. Economists say this could complicate South Africa’s monetary policy outlook, especially as the inflation cycle turns upwards.
“While inflation expectations have eased to their lowest levels on record, they remain well above the bank’s new 3% anchor, underscoring the challenge of entrenching lower inflation,” said Casey Sprake, an economist at Anchor Capital.
“Headline CPI inflation has already moved above 3% and could rise further in the months ahead, despite the recent strengthening in the exchange rate.”
Some anticipate an increase in inflation in the near term, but economists expect it to remain mild.
“At some stage, this benign inflation will give scope for the Reserve Bank to give further interest rate relief,” said Elna Moolman, the head of economic research at Standard Bank.
“However, it’s quite difficult to pinpoint the timing of such relief especially given the Reserve Bank’s new goal to anchor inflation and inflation expectations around the floor, rather than the midpoint, of its 3-6% inflation target.”