A customer shops for food in a supermarket in Cape Town. (Photo: Dwayne Senior / Bloomberg via Getty Images) 
CPI in June slowed to 5.1% year on year from 5.2% in May as food prices maintained their moderating trend and the retail price of petrol was cut by R1.24/litre at the start of June.
Consumer inflation has been between 5% and 6% for the past 10 months, above the midpoint of the SA Reserve Bank’s 3% to 6% target range, where the central bank wants to see it firmly anchored.
But the trajectory is in the right direction and last week, when the SA Reserve Bank’s Monetary Policy Committee (MPC) held its key repo rate steady at 8.25%, two of its six members voted for a 25 basis point cut.
Read more: SA Reserve Bank holds key repo rate steady, but signals positive outlook
Economists have taken this as a sign that the MPC may cut sooner than November, when it has been widely expected to finally pull the trigger.
In an economy that contracted 0.1% in the first quarter of 2024 and is expected to show little growth this year, there is little in the way of demand pressures to stoke inflation.
Cooling food and fuel inflation, supported by the rand’s relative strength, are the key drivers of slowing inflation.
“After stalling at 4.7% in April and May, the annual rate for food & non-alcoholic beverages (NAB) edged lower to 4.6% in June. Food & NAB inflation has declined from its recent peak of 14.0% in March 2023. June’s reading is the lowest since September 2020 – 45 months ago at the peak of the Covid-19 lockdowns – when the rate was 3.8%,” said Stats SA.
Stripping out non-alcoholic beverages, food inflation in June eased to 4.1% from 4.3% in May.
“Several food & NAB categories registered lower annual rates in June, including sugar, sweets & desserts; vegetables; fruit; milk, eggs & cheese; and fish. Inflation quickened, however, for hot beverages; bread & cereals; oils & fats; cold beverages; and meat,” said Stats SA.
The slowing rise in food prices is a big relief, especially for lower-income and working-class households, and among other things may help to contain union wage demands.
The bottom line is that hard-pressed South African consumers may finally be seeing some light at the end of the inflation and interest rate tunnel. DM