Koketso Mano | Consumer inflation steadied in May

19-06-24 / Koketso Mano

Koketso Mano | Consumer inflation steadied in May

Headline inflation was flat at 5.2% y/y in May. The print was in line with our and the consensus expectation. Monthly headline inflation was 0.2%, driven by core price pressures (contributed 0.1ppt), while food and fuel added the other 0.1ppt.

Core inflation also remained flat at 4.6% y/y and had monthly pressure of 0.1% - supported by transport, alcoholic beverages and tobacco as well as restaurants and hotels. Services inflation lifted to 4.7% from 4.6%, while core goods inflation slowed to 4.3% from 4.5% previously.

Average fuel prices lifted by 0.6% m/m and were up by 9.3% relative to May 2023.

Food and non-alcoholic beverages (NAB) inflation was 4.7% y/y, flat from the previous month. Monthly pressure of 0.2% was driven by cereals, NAB as well as dairy and eggs inflation. Meat and fruit detracted from the monthly pressure for the fourth consecutive month.

Outlook

We should see headline inflation continue its plateau in June. Monthly pressure should remain subdued, as higher core inflation, supported by new data on housing price pressures, is mitigated by fuel deflation. Food pressures should intensify in 2H24 as the impact of adverse weather conditions and higher soft commodity prices reaches retail shelves. In addition, utility inflation should also compound inflationary pressures.

Nevertheless, slowing global inflation, softer oil prices, a less depreciated rand, and subdued domestic demand should support slowing inflation going into 2025. In line with this, headline inflation should average just above 5% this year, before slowing closer to the 4.5% midpoint over the remainder of the forecast period.

The June inflation print is scheduled for release on 24 July. Major periodical surveys conducted in June include housing (16.49% weight in CPI), domestic worker wages (2.53%) and transport (1.88%).

Source: Stats SA, FNB Economics

*Koketso Mano, FNB Senior Economist