Good news for South Africa expected next week
South Africa’s headline inflation is expected to ease when Stats SA reports it next week, helped by a sizeable petrol price cut in July.
Stats SA will publish the latest inflation data for July 2026 on Wednesday, 19 August, with economists anticipating a cooler figure.
Projections are for inflation to be between 4.3% y/y and 4.8% y/y, down from 5.0% y/y in June.
Inflation came in sharply higher in June 2026, surprising markets with the 5.0% reading versus expectations of around 4.7%.
While the rise was expected, the jump from 4.5% in May was larger than anticipated, especially after that month’s reading was lower than market expectations.
The main drivers of inflation at the moment are transport and fuel prices, which have surged since the United States launched its war against Iran at the end of February 2026.
Motorists have been paying between R5 and R8 more per litre for petrol and diesel since the war broke out.
July saw significant cuts in the petrol and diesel prices (R1.96 and R3.59, respectively), which economists say will underpin the cooler inflation reading for the month.
However, July also saw municipalities implement electricity price increases, which undercut much of the relief offered by lower fuel prices.
According to economists at Nedbank, inflation is expected to come in at 4.3% y/y due to the lower transport costs and declining fuel prices.
The headline figure should also be helped by lower food inflation, which the bank said likely eased further from 1.4% to about 0.9%
Lower food prices were supported by lower global prices, robust domestic agricultural production, and the normalisation of meat prices as the impact of foot-and-mouth disease faded, it said.
Upward pressure will come from services inflation, with the bank noting that July is a heavy survey month for this category.
The services surveyed in July include housing and utilities, building and household contents insurance, and bus fares.
Within the ‘housing and utilities’ category, pressure will mainly come from electricity tariffs, as energy regulator Nersa permitted Eskom to raise electricity tariffs by 8.76% in 2026/27.
Nedbank noted that core inflation, which excludes energy and food prices, is forecast to ease from 4.1% to 3.9%—bringing it back within the Reserve Bank’s 3% target with a one-percentage-point band.
A kick in the teeth from Eskom
Investec economist Lara Hodes anticipates a slightly higher reading.
While still expected to cool, she said the finance group anticipates a reading of 4.8% y/y, down only 0.2 percentage points from June.
Acknowledging the same fuel price relief as Nedbank, Hodes noted this was likely outweighed by the municipal tariff increases, which could continue to bite.
This, again, is mostly down to the 8.76% hike from Eskom, which translated to a 9% hike at most municipalities.
“We could also see further upward pressure from services inflation, indicative of some second-round inflationary pressures,” she said.
The expected lower inflation reading next week could also be a blip in an otherwise sticky environment.
Fuel prices in August saw only a marginal cut to petrol and another R1+ hike to diesel, which would raise industry costs for the month.
Mid-month projections from the Central Energy Fund (CEF) also point to another looming petrol and diesel price hike in September, which could keep inflationary pressure going forward.
However, if inflation can be contained or surprise to the downside, then the interest rate outlook for the country will be brighter.
The South African Reserve Bank voted to hold on interest rates at its July meeting despite the uptick in inflation and rising inflation expectations.
At the time, SARB governor Lesetja Kganyago said that while inflation is higher and risks remain, other economic data pointed to a more contained situation for South Africa.
He said that the Monetary Policy Committee had agreed that the outlook is uncertain, but was satisfied that the current policy rates were adequately restrictive.
He warned that risks are mounting—particularly with inflation—but the bank would review conditions on a meeting-by-meeting basis.
The SARB will have its next meeting in September, with inflation for July and August being closely watched.
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