
June inflation heats up as power, food prices bite
Consumer price index (CPI) inflation came in at 3% for June – from 2.8% in May.
Inflation has been below 3% - the bottom level of the SA Reserve Bank's target band - from March to May.
But in June, food prices continued to heat up. Food and non-alcoholic beverages were 5.1% more expensive than a year ago. Beef was a big contributor, as foot-and-mouth disease fuelled price hikes. Meat prices rose by 2.2% in the single month from May to June - and were almost 7% higher than a year before.
But the biggest surge over the past year, of more than 13%, was in prices of fruit and vegetables. Hot beverages were also 10.1% more expensive than a year ago.
Household electricity and gas prices were 11% higher than a year before, reflecting the latest Eskom price hikes.
Housing and utilities saw a month-on-month increase of 0.5%, with rent increasing 1% month-on-month.
June's inflation was still tempered by lower diesel and fuel prices - but this was reversed in July with large hikes after Israeli and US attacks on Iran triggered an oil price spike.
While slightly higher than May, June's inflation number is in line with expectations and should bolster the case for the Reserve Bank's monetary policy committee to cut the repo rate by 25 basis points to 7% on Thursday next week.
A cut is also supported by South African inflation expectations, which in the second quarter reached an almost four-year low.
Unions, households and businesses are surveyed by the Bureau for Economic Research on their expectations for inflation over the next two years, which cooled to 4.5%.
Expectations about where inflation is heading play a key role in driving prices higher. When workers expect inflation to remain high, they demand higher salary increases, which in turn drive prices higher as companies must recoup these higher costs.
The SA Reserve Bank has been pushing hard to lower SA's inflation target to 3% (from a band of 3% to 6%).
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