Consumer inflation records a marginal drop in June

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The print was slightly lower than our 5.2% prediction but aligned with the consensus expectation. Monthly headline inflation was 0.1%, driven by core price pressures (contributed over 0.2ppt) and food (added 0.1), while fuel shaved off over 0.2ppt.

Core inflation slowed to 4.5% y/y but had monthly pressure of 0.4% that was driven by housing and household contents. Services inflation was 4.6%, barely moving from 4.7% previously. Core goods inflation lifted to 4.5% from 4.3% in May.

Average fuel prices fell by 4.6% m/m and were up by 7.6% when compared to June 2023, down from 9.3% previously.

Food and non-alcoholic beverages (NAB) inflation was 4.6% y/y, a slight decrease from 4.7% in the previous month. Monthly pressure of 0.5% was driven by cereals, dairy and eggs, as well as NAB inflation. Vegetables detracted from the monthly pressure.

Outlook

Headline inflation should continue its relative stability in July. This is despite monthly pressures lifting strongly on utility cost increases and intensifying food-price pressures. Nevertheless, fuel deflation, following the R1 per litre reduction in petrol prices, should once again mitigate these pressures.

Headline inflation forecasts for 2024 and 2025 are being scaled down, as seen in the latest Sarb forecast as well, reflecting slowing global inflation, stable oil prices, a less depreciated rand, and subdued domestic demand.

However, upside risks are material as heightened geopolitical tensions affect logistics and the trade of goods. Furthermore, adverse weather conditions should support the premium on soft commodity prices. Therefore, while the IMF predicts that global inflation will slow to 4.4% in 2025, from 5.9% this year, the emphasis is that the road ahead should be bumpy.

The July inflation print is scheduled for release on Wednesday 21 August, 2024. Major periodical surveys conducted in July include municipal utilities (6.25% weight in CPI), funeral expenses and insurance (2.28%), as well as home insurance (1.15%).