The just released January CPI (YoY) results by Statistics South Africa (Stats SA) showed the country’s inflation increased by 0.2% from the 5.1% recorded last December to 5.3%. The major drivers of the uptick were food and non-alcoholic beverages (increased by 7.2% year-on-year), housing and utilities (increased by 5.7% year-on-year), miscellaneous goods and services (increased by 5.4% year-on-year), transport (increased by 4.6% year-on-year).
https://www.digital.zenithbank.com/ZEQ/ZEQ-jan-2026/index.html#p=1
The latest results show a discontinuation in the trend which kicked off in October 2023. We saw the inflation figure move in a whip-saw fashion last year owing to factors such as the monthly changes in oil prices in the country to reflect the landing cost as the country is heavily reliant on imported oil. However, the inflation rate closed the year 1.8% lower than its opening of 6.9% recorded in January 2023.
Also, the South African Composite Leading Business Cycle Indicator (SCLBCI) released yesterday by the South African Reserve Bank (SARB) showed a 0.8% month-on-month drop (from 111.9 to 111.0) in December 2023 following its 0.36% fall in November 2023 (112.3 to 111.9). The indicator that tracks real economic activity shows the economy is still afflicted with poor market sentiment and dwindling business confidence.
ANALYST’S COMMENTS
With the country facing an energy crisis, supply chain disruptions, rising oil prices, and growing debt among other issues; increasing inflation may continue to dampen the country’s outlook. This could discourage foreign investors and further result in slow growth.
South Africa’s first Monetary Policy Committee (MPC) may continue to hold its repo rate at the 14-year high of 8.25% to combat the growing inflation rate. The SARB which paused its rate hike in May 2023 after increasing rates by a cumulative 475 basis points from November 2021 will likely keep interest rates steady if inflation continues to bite. However, the bank will factor in the recently released unemployment data as well as other economic data before making its move in its coming meeting.
