Economist warns consumer pressure to persist as inflation reaches 5%
Annual consumer inflation accelerated to 5% in June, up from 4.5% in May, marking the highest inflation rate recorded since June 2024, according to the latest Consumer Price Index released by Stats SA on Wednesday.
On a monthly basis, prices increased by 0.7% between May and June, matching the previous period's increase.
Economist at the Buro for Economic Research, Lisette Ijsel de Shepper, said inflation came in higher than expected, with transport, housing and services making the largest contribution to June's increase.
Transport emerged as the biggest contributor to both the monthly and annual rise in inflation, largely driven by higher fuel prices.
Stats SA reported that transport inflation accelerated to 3.3% in June, up from May, while fuel prices climbed more than 30% over the past year, with diesel prices surging by over 50%.
Several transport services recorded notable monthly increases, including minibus taxi fares, e-hailing fares, long-distance bus fares, and school transport fares.
"The annual consumer inflation print was a little bit higher than we anticipated,” De Shepper said.
“We anticipated a slower increase. The increase was largely driven by transport costs, fuel prices, and also higher prices of public transport and transport services. Housing utilities were higher, as well as services inflation, so insurance, financial services and so forth."
She noted that although consumers experienced some relief at the fuel pumps in July, the outlook remains uncertain due to tensions in the Middle East.
"We saw some relief at the pump at the start of July, but given the things that are happening in the Middle East at the moment and the renewed sort of escalation of the war between the US and Iran, it seems like fuel prices could once again increase in August, so the pressure is here to stay with us for some time."
Actual rental prices were among the notable contributors to consumer inflation, increasing by 1.1% between the first and second quarters of the year, bringing the annual increase to 4.1%.
Over the past 12 months, rental costs rose across different housing categories, with townhouse rents increasing by 5.4%, flats by 4.6%, and houses by 3.7%.
De Shepper says the rise in rental prices reflects renewed demand in the housing market, which is gradually pushing costs higher.
She says stronger demand for accommodation typically results in steady increases in rental prices and related housing expenses.
De Shepper also attributed higher rental costs to renewed demand in the housing market.
"The increases that we've seen in some of the housing categories is because there is sort of a renewed healthy demand for housing. So when you see higher demand for housing, you see prices for rents and things like that slowly but surely do tick up."
"Fuel prices put pressure on disposable income. We have to spend it on fuel; we can't spend it on something else. The interest rate has already been increased in May; another increase is possible in July. So there is certainly pressure on consumers' pockets that is not falling away or not disappearing as quickly as one would have hoped."
While she described the rental increases as relatively moderate compared to previous years, she warned that higher fuel costs continue to squeeze household budgets.
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