June inflation climbs as fuel prices surge

[00:00:00]The consumer price index measures changes in the price of a basket of consumer goods and services. The index increased more than market expectations.

[00:00:10]This saw a little relief for consumers with transport, food, and housing utilities the biggest contributors to both the annual and monthly increases in the CPI.

[00:00:21]>> Annual consumer inflation jumped to 5% in June from 4 and 1/2% in May.

[00:00:27]This is the highest inflation print since June 2024 when the rate was 5.1%.

[00:00:34]Prices rose by 0.7% on average between May and June, the same as the previous monthly increase.

[00:00:41]Let's start with transport, which was the largest contributor to both the annual and monthly changes in the CPI.

[00:00:49]This was mainly underpinned by higher fuel prices.

[00:00:53]Its annual rate accelerated to 12.7% in June from 9.4% in May. Processed meat that experienced high rates in June include sausages at 11.8%, corned meat up by 10.2%, and bacon rising by 8.6%.

[00:01:12]>> According to the data, fuel prices accelerated to 12.7% in June from 9.4% in May. This was driven by sharp increases in diesel and petrol. Rand Swiss Viv Govender says this came as no surprise with higher fuel prices having had a knock-on effect on passenger transport inflation, which registered a monthly rise of 8.1% in June.

[00:01:37]>> This was the big driver pushing inflation higher. As you know, the uh We're still seeing quite a a big impact coming through from the Iran war uh in June uh where oil prices remained quite at elevated prices. Uh and that obviously translated to higher diesel and petrol prices, which obviously fed into the rest of the economy.

[00:01:57]>> Good news is that consumer food price inflation slowed to 1.4% in June from 1.6% in May with some items like pork and corned meat registering some price hikes.

[00:02:10]>> We see a broad deceleration across a range of products that are in the food basket. And in fact, some products are actually in deflation, which means that if you look at the prices of those products this year and you compare to last year, they are truly coming down.

[00:02:26]Those are grain-related food products, uh vegetables, as well as fruits. Of course, it depends on what vegetable are you looking at and what fruits are you looking at, but broadly, we see that those products are actually in deflation.

[00:02:41]>> Senior economist at Standard Bank, Dr. Elna Moolman, says the latest inflation uptick created a dilemma for the South African Reserve Bank given that inflation is now well above the bank's 3% inflation target.

[00:02:55]>> We therefore just uh expect the MPC to be quite divided at this week's meeting.

[00:02:59]It may very well then decide to hike interest rates further, but this should be the peak in their hiking cycle. And we still think that as soon as the war is over and oil prices sus- uh sustainably lower, the Reserve Bank should start unwinding these rate hikes and cut rates even further to a terminal rate of 6%.

[00:03:20]>> Well, all eyes will be on the Central Bank's Monetary Policy Committee that's meeting this week to announce its latest rate decision. Katlego Wodumo, SABC News in Johannesburg.