South Africa: Inflation falls to lowest level since June 2020 in March
Latest reading: Inflation receded for the first time in five months in March and fell to 2.7%, below February’s 3.2%. March’s figure represented the weakest inflation rate since June 2020, was below the lower bound of the South African Reserve Bank (SARB)’s 3.0–6.0% target range, and surprised markets to the downside.
Looking at the details of the release, price pressures for food and non-alcoholic beverages—which account for over 18% of the consumer price index basket—eased and transportation prices fell at a quicker pace in March compared to the previous month.
Accordingly, the trend pointed down mildly, with annual average inflation coming in at 3.8% in March (February: 4.0%). Meanwhile, core inflation fell to 3.1% in March from February’s 3.4%.
Lastly, consumer prices rose 0.40% in March over the previous month, moderating from the 0.90% increase logged in February.
Outlook: Our Consensus is for inflation to gradually increase in Q2 and Q3—returning to the SARB’s target band—and to rise further in Q4, hitting the midpoint of the central bank’s target range.
Overall in 2025, inflation will fall below last year’s level, tempered by past interest rate increases and a stronger year-on-year rand vs the USD. Upside pressures will stem from faster wage and private consumption growth. Additionally, upside risks include extreme weather, a worsening of the recently renewed power cuts and a stronger-than-expected U.S. dollar.