Consumers in South Africa faced a sharper increase in the cost of living in June than economists had predicted. Annual inflation accelerated to 5%, up from 4.5% in May. This figure reached the level observed in June 2024, which was caused by increased transport costs.
Key Drivers of Price Increases
According to Statistics South Africa data, consumer prices rose by 0.7% month-on-month. The transport, housing, and utility sectors, as well as insurance and financial services, contributed most significantly to annual inflation. Transport became the main driver, accelerating by 12.7%. Housing and utility price increases amounted to 5.5%, while insurance and financial services saw a rise of 5.9%.
Meanwhile, inflation in the food segment remained relatively moderate. Annual inflation for food and non-alcoholic beverages was 1.6%. Specifically, the price of cereals continued to fall (deflation) by 1.5%, and fruit prices dropped by 10% compared to the previous year. However, meat prices rose by 5.1% year-on-year, and the cost of electricity, gas, and other fuels increased by 9.9%, with fuel prices being 34.3% higher than in June 2025.
Economists' Forecasts
Despite expectations of growth, economists predicted that annual inflation in June would be slightly higher, in the range of 4.7%–4.8%, attributed to rising fuel prices. These forecasts suggested that inflation would remain within the target range set by the South African Reserve Bank, which is 3% with an allowable deviation of one percentage point in either direction. Many experts viewed the recent rise as a temporary phenomenon rather than the start of a sustained acceleration in price growth.
Johann Els, Chief Economist at PSG, expected annual inflation to reach around 4.8% in June, mainly due to the rise in petrol prices. Nevertheless, he noted that this increase would be short-lived, as the expected reduction in fuel prices introduced in July should allow inflation to fall back to a level between 4.2% and 4.3%.
Impact of Oil Prices
Els also mentioned that inflation expectations rose in the second quarter after oil prices climbed to approximately $100 per barrel. However, since then, oil prices have fallen to $74 per barrel, and lower prices for petrol and diesel in July should ease the financial situation of households in the coming months. These comments from Els preceded the resumption of hostilities in the Middle East, which led to a renewed rise in oil prices above $85 per barrel.
Samuel Seeff, Chairman of Seeff Property Group, forecasted that inflation in June would be around 4.7%. Acknowledging the expected increase, he noted that the projected average annual inflation remained below the central bank's upper target limit of 4%, indicating that inflation should remain generally controlled. Seeff argued that the expected rise in June reflects a temporary spike, whereas the impact of interest rate hikes on consumers and the economy is felt much longer. He added that prolonged restrictive monetary policy has contributed to weak economic growth and continues to put pressure on the property market.
Transport and Outlook
Vishal Rama, Portfolio Manager at Prescient Investment Management, also predicted annual inflation to rise to 4.7%–4.8%, primarily linked to increased transport costs following the rise in fuel prices in June. Rama believed that food inflation would continue to slow down due to favorable base effects and falling fresh produce prices, helping to offset some of the pressure created by transport costs. In his view, despite transport becoming the largest factor in headline inflation recently, easing food price pressures should limit broader inflationary pressure, suggesting that June may mark the peak of the current inflation cycle.
Meanwhile, Investec revised its forecast for average inflation in 2026 upwards, setting it at 3.7% instead of the previous 3.3%, reflecting the impact of higher international oil prices on inflation outlooks.
