SerpApi.Org
South African consumers faced a sharper increase in the cost of living in June than economists had expected, with annual inflation accelerating to 5% from 4.5% in May, reaching levels last seen in June 2024 as higher transport costs pushed prices higher.
Statistics South Africa said consumer prices rose 0.7% month-on-month, while transport, housing and utilities, and insurance and financial services were the biggest contributors to annual inflation.
Transport made the largest contribution to the annual inflation rate as transport inflation accelerated to 12.7%. Housing and utilities climbed 5.5%, while insurance and financial services moved 5.9% higher.
Food inflation remained relatively subdued despite the stronger headline reading. Annual inflation for food and non-alcoholic beverages measured 1.6%, with cereal products continuing to record deflation at 1.5% and fruit prices down 10% compared with a year earlier.
However, meat prices were 5.1% higher than a year ago, while electricity, gas and other fuels increased by 9.9% and fuel prices were 34.3% higher than in June 2025.
Above expectations
Economists had expected annual consumer inflation to edge slightly higher in June, with forecasts ranging between 4.7% and 4.8%, largely due to higher fuel prices during the month.
Despite the anticipated increase from May's 4.5%, inflation was expected to remain comfortably within the South African Reserve Bank's target range of 3% with a band of one percentage point on either side.
Several economists have been viewing the uptick over the past few months as temporary rather than the start of a sustained acceleration in price growth.
PSG chief economist Johann Els expected annual inflation to rise to about 4.8% in June, driven primarily by higher petrol prices. However, he said ahead of the print that the increase will be short-lived, noting that the sharp fuel price cuts implemented in July should see inflation ease again to between 4.2% and 4.3%.
Oil effect
Els said inflation expectations had risen during the second quarter after oil prices climbed to around $100 a barrel during the survey period. Since then, however, oil prices had fallen to about $74 a barrel, while lower petrol and diesel prices for July should help ease pressure on household budgets in the months ahead.
However, Els’ comments came before the resumption of hostilities in the Middle East, which saw the black liquid climb above $85 a barrel again.
Samuel Seeff, chairman of the Seeff Property Group, expected June inflation to come in at around 4.7%. While acknowledging the expected increase, he said the projected average inflation rate for the year had so far been below the central bank’s upper target level of 4%, suggesting inflation should remain broadly contained.
Seeff argued the expected June increase would reflect a temporary spike, while the impact of higher interest rates on consumers and the broader economy has been felt over a much longer period. He said prolonged restrictive monetary policy has contributed to weak economic growth and continues to weigh on the property market.
Transport weighs
Vishal Rama, portfolio manager at Prescient Investment Management, had anticipated annual inflation rising to between 4.7% and 4.8%, driven mainly by higher transport costs following June's fuel price increases.
Rama said food inflation was expected to continue moderating, supported by favourable base effects and lower fresh produce prices, helping to offset some of the pressure from transport costs.
“Although transport has become the largest contributor to headline inflation in recent months, easing food price pressures should help limit broader inflationary pressures, suggesting that June may mark the peak of the current inflation cycle,” said Rama.
Investec has meanwhile revised its average inflation forecast for 2026 higher to 3.7%, from its previous estimate of 3.3%, reflecting the impact that higher international oil prices have had on the inflation outlook.
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