Consumer inflation remained at 5.2% in May, unchanged from April and down slightly from 5.3% in March, Stats SA said on Wednesday.
The monthly change in the consumer price index (CPI) was 0.2%.
This was broadly in line with economists’ expectations, and forecasts for inflation to remain sticky at about 5% until later in the year.
Annual inflation rates for food and nonalcoholic beverages remained steady between April and May. Higher rates were recorded for transport, though inflation softened for miscellaneous goods and services, communication, clothing and footwear, and health.
“After five consecutive months of decline, food inflation remained steady at 4.7% in May, unchanged from April,” said Stats SA.
Price increases slowed for bread and cereals; milk, eggs and cheese; and sugar, sweets and desserts. This was offset by increases for products such as rice, pizza, sweet biscuits and bread rolls.
Nedbank economists Johannes Khosa and Nicky Weimar said the moderation in food prices seen in previous months was likely to slow in line with the rate of decline in global food prices, and as the lagged effect of drier weather conditions this summer started to filter through the supply chain.
Transport inflation quickened to 6.3% from 5.7% in April. This, said Stats SA, was the highest rate for the category since October 2023. “Fuel was the major culprit, with petrol and diesel prices increasing on average by 9.3% over the last 12 months.”
The petrol price increased 37c/l in May. However, the substantial petrol price cut in June — and another one on the cards for July — could provide consumers with some relief.
Stats SA said the price of cold and flu medication increased by 11% at the start of winter, while cough syrup was up 8% and vitamins 7%. Despite these increases, overall inflation for health products cooled from 7.7% in April to 5.8% in May.
Nedbank expects inflation to decelerate below 5% during the fourth quarter to end the year at about 4.6% — close to the midpoint of the Reserve Bank’s target range of 3%-6%.
Oxford Economics has adjusted its expectation for headline inflation to average 5% for the year, compared with 5.2% previously.
“The latest inflation print points to some stickiness, but stronger disinflation could see the headline rate at the 4.5% midpoint by the fourth quarter. Sizeable fuel price cuts in June imply that overall inflation should ease further at the end of the second quarter, which was not our expectation initially,” said Jee-A van der Linde, senior economist at Oxford Economics.
Given the improvement in the inflation outlook, Van der Linde said the odds that the Bank could implement a 25 basis point rate cut in September had risen.
Shannon Bold, senior economist at the Bureau for Economic Research (BER) said they also expected inflation to moderate throughout the rest of the year, averaging about 5% in 2024.
“This should bode well for a repo rate cut or cuts later in the year provided that inflation expectations of price-setters, namely trade unions and businesses, start to trend lower.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.