Household Affordability Index Rose in July, Food Prices Increased

Inflation in South Africa reached its highest level in two years in June, driven by a sharp increase in fuel prices. This rise in transport costs has become a significant burden for drivers and passengers amid ongoing geopolitical tensions affecting the local economy.

June Inflation Data

According to a report from Statistics South Africa (Stats SA) on Wednesday, annual consumer price inflation accelerated to 5% in June, up from 4.5% in May. This figure exceeded market expectations of 4.7%. This growth marks the fourth consecutive monthly increase and the highest rate since June 2024, when it stood at 5.1%. This may force the SA Reserve Bank to adjust the monetary policy rate to slow down inflationary acceleration.

Monthly consumer goods prices rose by 0.7%, matching the increase seen in May. The transport sector contributed the most to this rise, where annual inflation jumped from 9.4% in May to 12.7%. Patrick Kelly, Chief Director of Stats SA for Price Statistics, emphasized that higher fuel prices were the dominant cause of this acceleration.

Impact of Fuel Price Increases

Fuel prices increased by 34.3% over the last 12 months, with diesel rising by 50.8% and petrol by 31.7%. The main driver of these increases was high global oil prices linked to the conflict involving Iran. The higher cost of fuel was quickly reflected in public transport, leading to a sharp rise in inflation in this category. Passenger transport inflation showed a monthly increase of 8.1%, bringing the annual rate to 12.5% from 4% in May.

Over the month, minivan fares rose by 11.5%, ride-sharing services increased by 8.7%, long-distance bus fares rose by 8.4%, and school transport costs increased by 3.7%.

Other Price Pressure Factors

Housing and utilities also exerted pressure on inflation, where annual inflation reached 5.5%. Water supply costs increased by 6.9%, while prices for electricity, gas, and other fuels rose by 3.9%. Rental inflation also accelerated following a quarterly update included in the consumer price index. Actual rent rose by 1.1% compared to the March quarter, pushing annual rental inflation to 4.1%. Over the year, townhouse rents increased by 5.4%, apartment rents by 4.6%, and house rents by 3.7%.

Underlying price pressure intensified: core inflation, excluding food, fuel, and energy, reached 4.1%, the highest level since September 2024. Despite overall inflationary pressure, food price inflation remained relatively moderate.

Food Price Dynamics

Inflation for food and non-alcoholic beverages continued to decline, standing at 1.6% in June compared to 1.9% in May and 2.9% in April. Kelly noted that some staple foods became cheaper. Cereal products showed deflation for the fifth consecutive month (-1.5%), and white rice prices fell by 13.4%, while cornmeal prices dropped by 5.9%, with porridge decreasing by 1.3% compared to the previous year.

Meat inflation also slowed, falling to 5.1% from a recent peak of 13.5% in January. Ground beef inflation sharply slowed to 3.9%, and stewed beef entered deflation territory (-2.7%). However, some food items remained under pressure: pork inflation remained high at 13.9%, while lamb and mutton inflation accelerated to 8.4%. Processed meat products also showed notable growth: sausages rose by 11.8%, ham by 10.2%, and bacon by 8.6%.

Hot drinks also remained a source of persistent inflation, with annual price growth at 7.4%. Black tea rose by 8.3%, and instant coffee became 7% more expensive compared to last year. The June inflation results demonstrate how external energy shocks are increasingly influencing domestic prices, as higher fuel costs spread to transport, services, and overall inflation, even though food prices remain relatively stable.