South Africa: Inflation holds steady in February
Latest reading: Inflation came in at 3.2% in February, unchanged from January’s reading and within the South African Reserve Bank (SARB)’s 3.0–6.0% target range. February’s reading undershot market expectations. Looking at the details of the release, the change in prices for housing and utilities was broadly stable in February. Meanwhile, prices for food and non-alcoholic beverages grew at a stronger rate, and transportation prices shrunk at a more pronounced pace.
The trend pointed down slightly, with annual average inflation coming in at 4.0% in February (January: 4.2%). Meanwhile, core inflation edged down to 3.4% in February from January’s 3.5%.
Lastly, consumer prices rose 0.90% over the previous month in February, picking up from January’s 0.30% increase. February’s uptick was the highest reading since February 2024.
Outlook: Our Consensus is for inflation to hover around current levels in the rest of H1 2025, before picking up in Q3 and further in Q4, when it should hit the midpoint of the SARB’s target band. Still, inflation will average below last year’s level overall in 2025; past interest rate increases, a high base of comparison and a stronger rand year on year versus the U.S. dollar will temper price growth. Continued wage growth and faster private spending growth in 2025 will exert upside pressures.
Extreme weather events, a worsening of the recently renewed power cuts and a stronger-than-anticipated U.S. dollar due to U.S. protectionist policies pose upside risks.