Inflation: Time to beef it up as some meat prices drop, but airfares rise sharply

South African annual consumer price inflation rose to 4.5 percent in September, up from 4.4 percent in August, driven primarily by a spike in transport costs. Statistics South Africa released the Consumer Price Index data on Wednesday, revealing that the increase came in below market expectations. Many analysts had forecast the year-on-year rate would climb to between 4.6 percent and 4.7 percent. The surge follows a fuel price crisis linked to the ongoing conflict between the United States and Iran, which began on February 28. Transportation expenses accounted for 1.5 percentage points of the total monthly inflation. Year-on-year, transport costs jumped 10.8 percent. Between January and September, petrol prices climbed by 6.13 rand per liter, while 500ppm diesel costs surged by 10.66 rand. In September alone, 95-octane fuel increased by 1.34 rand per liter, and diesel prices rose by up to 3.15 rand per liter. The fuel price index itself jumped 6.2 percent from August to September and stands 27.9 percent higher than a year ago. Diesel is now 46 percent more expensive than in the previous year, while petrol prices are up 25 percent. These fuel hikes triggered a ripple effect in passenger transport and courier services. Passenger transport rates have remained in double digits since June, reaching 12.3 percent in September, up from 11.6 percent in August. Airfares saw a sharp annual increase of 18.6 percent, followed by long-distance bus fares at 14.1 percent and minibus taxi fares at 13.8 percent. Courier service rates rose to 6.8 percent. Housing and utilities contributed another 1.3 percentage points to the overall inflation figure, rising 5.2 percent year-on-year. This sector was driven largely by steep increases in water tariffs, up 7.4 percent, and electricity tariffs, up 7.9 percent. Insurance and financial services also pushed inflation upward, growing 5.4 percent and adding 0.6 percentage points to the total. Rental inflation showed some improvement, slowing from 4.1 percent to 3.9 percent year-on-year. Food and non-alcoholic beverage inflation increased modestly to 1.2 percent year-on-year, falling 0.1 percent month-on-month. Cereal products, including bread, pasta, rice, and maize meal, recorded their eighth consecutive month of deflation, averaging 1.9 percent cheaper than the previous year. Maize meal specifically was 8.6 percent less expensive. Meat price inflation hit an 18-month low at 0.7 percent. Beef products became cheaper than a year ago, with stewing beef down 7.2 percent, beef mince down 4.6 percent, and beef steak down 4.4 percent. These declines contrast with the previous year, when beef prices rose by up to 30 percent due to a foot-and-mouth disease outbreak. Goods inflation accelerated from 3.3 percent in August to 4.1 percent, suggesting fuel costs may be spreading to other consumer items. Services inflation dipped slightly from 5.1 percent to 4.9 percent. Core inflation, which excludes fuel, food, and electricity, declined to 4 percent, down from 4.1 percent in August and 4.2 percent in July. This level sits at the upper limit of the Reserve Bank’s tolerance band, which allows for one percentage point deviation from its 3 percent target. Provinceally, Limpopo saw its inflation rate drop to the 3 percent target. The Western Cape maintained the highest rate in the country at 5.5 percent, the only province exceeding 5 percent. The Eastern Cape followed with a rate of 4.7 percent. Johann Els, a senior economist at PSG, noted that there is limited evidence of second-round inflationary pressure beyond direct transport impacts. He stated that while taxi and public transport costs have risen, broader price pressures remain contained. Els anticipates inflation will rise slightly above 5 percent in October and November. He predicts base effects will begin lowering the rate around April next year. By the second half of 2027, he expects inflation to return to approximately 3 percent or lower, depending on the extent of anticipated oil price declines and subsequent reductions in petrol prices.