Consumer inflation moderated in June, in line with market expectations.

Stats SA data shows that the annual consumer inflation rate slowed to 4.9% in June from 5.2% in May.

The consumer price index increased by 0.2% between May and June 2021.

The main contributors to the 4.9% annual inflation rate were food and non-alcoholic beverages; housing, utilities and transport.

Food inflation has continued an upward trajectory – increasing for the fourth consecutive month.

The prices of the oils and fats sub-category as well as sugar remained elevated, while 5 kilograms of maize meal cost 19 cents more in June than it did in May.

The price of 2.5 kilograms of sugar was nine cents higher in June, when compared to May, while 750ml of sunflower oil cost six cents more in June than it did the previous month.

Inflation is expected to continue to moderate going forward.

Economists says the global oil prices have decreased and this will likely offset the impact of the weaker rand.

The South African Reserve Bank expects inflation to average 4.2% this year.

“The reality is that after the severe strike action that SA has experienced, this will see a sharp moderation in economic growth this year, we had expected to see GDP at 4.5% for 2021, and now it may come out at 3.9% instead, but actually the third quarter sees a significant contraction of about 6% annualised bases and of course this will then feed in to weaker forecast for the reserve bank itself in its GDP and we believe we will interest rates remain unchanged this year and in to next year. The reality of the situation though is that business confidence does not return soon and the consumer confidence as well, there will be less investment in the economy and of course less jobs as well,” says Investec chief economist, Annabel Bishop.

The contained inflation environment and the weak economic prospects will boost chances of the Reserve Bank keeping interest rates at the current low levels for some time, to support economic recovery.

Discussion on the latest inflation figures: