Prices are up in South Africa – with a warning of more to come

 ·22 Jan 2025

Inflation ticked up slightly in December, which was in line with expectations, but it remains at the lowest point of the South African Reserve Bank’s (SARB’s) target range.

This suggests that interest rate cuts are around the corner.

According to Stats SA, consumer price inflation was 3.0% in December 2024, up slightly from 2.9% in November 2024.

The CPI increased by 0.1 percentage point month-on-month in December 2024.

Stats SA said that the main contributors to the 3.0% annual inflation rate were:

  • Housing and utilities (4.4% and contributing 1.0 percentage point);
  • Miscellaneous goods and services (6.6% and contributing 1.0 percentage point);
  • Food and non-alcoholic beverages (2.5% and contributing 0.5 of a percentage point); and
  • Alcoholic beverages and tobacco (4.3% and contributing 0.3 of a percentage point)

In December, the annual inflation rate for goods was 1.9%, up from 1.6% in November.

Services were up 4.2%, but this declined from the 4.3% in November 2024.

Average annual consumer price inflation was 4.4% in 2024, which is far below the 6.0% average in 2023.

The latest inflation figures are at the bottom of the SARB’s 3% to 6% target range, and well below the midpoint of 4.5% that the central bank is squarely targeting.

According to Investec chief economist Annabel Bishop, the figures were in line with projections, but she warned that further inflation hikes lie ahead.

This is because substantial petrol price drops totalling R4.44/litre from May to the end of the third quarter of the year were a key driver of the lower figures.

However, this subduing effect is coming to an end.

Specifically, December saw a 17c/litre petrol price rise, and January a 12c/litre hike.

February is currently set for an 80c/litre-plus increase in fuel prices, which will contribute further to higher inflation in that month.

Interest rate impact

The inflation outlook will also have a wider effect on interest rates.

Although the SARB has stressed that it makes interest rate decisions considering future inflation movements, the central bank is widely expected to cut interest rates by 25 basis points when it meets next week.

However, the future trajectory of interest rates remains uncertain.

SARB Governor Lesetja Kganyago warned that aggressive tariffs introduced by President Donald Trump could result in further price pressure, while the impact of his other policies over the longer term remains to be seen.

Following the expected January cut, the cutting cycle is expected to slow down until “July at least,” said Bishop.

Inflation basket changes

The latest inflation numbers represent the last CPI report for 2024.

Stats SA has announced that some changes to the inflation basket will take effect in 2025, including new categories, shifts in basket weights and a resetting of the base period.

According to the group, the new base period for the inflation basket will be set to December 2024.

Stats SA will also introduce changes to the classification of goods and services monitored in the CPI from the January 2025 release.

In 2018, the United Nations Statistics Division adopted an updated version of the Classification of individual consumption by purpose, known as COICOP 18.

The current version of COICOP was adopted in 1999 and first used in the South African CPI in 2008. The new version aims to reflect changes in consumer expenditure patterns, including the impact of new technology.

The most significant change is the creation of a dedicated Insurance and Financial Services category.

These services currently form part of the Miscellaneous Goods and Services category.

Several products have also moved between categories, it said.

For example, computers and televisions have moved to Information and Communication from Recreation, Sport and Culture.

Postal and Courier services have moved from Information and Communication to Transport. Several food products will move between groups and be reclassified.

The stats body said that the changes will fine-tune local data and improve the international comparability of economic data.

Stats SA will do the updates in the January 2025 CPI statistical release, which will be published in February 2025.

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