The highlight of this week’s economic calendar will be Wednesday’s consumer inflation print from Stats SA that is almost certain to show another uptick in April from the 3.1% rate recorded in March, as price pressures from the US-Iran war start seeping through.
The report will be a strong indicator of the South African Reserve Bank’s likely decision on interest rates when it concludes its third monetary policy meeting of the year next week.
“We expect headline consumer inflation to accelerate from 3.1% in March to 4.4% in April, driven primarily by a sharp increase in transport costs, stemming from a surge in fuel prices,” banking group Nedbank said in its latest weekly economic monitor.
“During April, fuel prices rose by 15.3%, reflecting the impact of the Iran war and the closure of the Strait of Hormuz, which led to a significant rise in global oil prices. As a result, fuel inflation is projected to increase sharply, rising from minus 8.7% year on year in March to 8.7% in April.”
Investec economist Lara Hodes has a more benign 3.7% forecast for April inflation, but even that would be a sharp pivot from the Bank’s 3% inflation target.
Earlier this month, Reserve Bank governor Lesetja Kganyago said given the risks to inflation and the uncertainty about the Middle East conflict, its monetary policy committee would in its next few meetings have to “make tough decisions” about whether second-round effects from the fuel price shock were coming and if it had enough space to look through them.
“If we do have to raise rates it will be to sustain low and stable inflation and all the benefits that brings,” Kganyago said.
The Bank holds six policy meetings annually and after next week it will next ponder interest rates in July, September and November.
Despite the more favourable inflation and interest rate environment experienced over the past year, consumers remain largely constrained and vulnerable to price shocks and potential interest rate increases caused by the Middle East conflict, said Hodes.
“Accordingly, we are likely to see some pressure on spend in the near term with transport costs climbing and confidence projected to have waned,” she said.
This growing pressure is likely to be reflected in Stats SA’s retail sales numbers for March later on Wednesday. Sales were up 1.6% year on year in February but marked the weakest growth in retail activity since September 2024 and undershot economists’ forecast of a 4.8% jump.
“Volume sales over the past three months are only 0.5% higher compared with the preceding three months,” economists at FNB said in a note.
“Importantly, this data largely predates the war in the Middle East, which has since heightened uncertainty and unsettled oil markets, developments that are likely to dampen sentiment and weigh on consumer activity going forward,” FNB said.
On Thursday, Stats SA publishes selected private sector building data for March, as reported by local government institutions. The previous report showed that the value of building plans approved in South Africa slipped by 11.2% year on year to R7.4bn in February after a revised 1.2% increase the previous month.
The impact of the Middle East war will again be in focus from Monday to Wednesday when national carrier SAA hosts a gathering of senior African airline executives, global aviation leaders, regulators and industry stakeholders to discuss the challenges, opportunities and strategic priorities shaping the future of aviation on the continent.
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