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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
November 20, 2024

Consumer Inflation

Inflation in South Africa fell from 3.8% in September to 2.8% in October 2024, with monthly deflation of 0.1%. Rising prices in housing, food, and services continue to strain household budgets. Positive news includes the US Fed’s rate cut, allowing for potential interest rate reductions by the SARB, which could boost demand and economic growth.

Inflation in South Africa declined from 3.8% in September to 2.8% in October 2024, marking a monthly deflation of 0.1%. The inflation rise in September was primarily driven by:

  • Housing and utilities: up 4.8%, contributing 1.1 percentage points
  • Miscellaneous goods and services: up 6.8%, adding 1.0 percentage point
  • Food and non-alcoholic beverages: up 3.6%, contributing 0.7 percentage points
  • Alcoholic beverages and tobacco: up 4.5%, adding another 0.3 percentage points

Although these categories continue to see price increases, the rate is slowing. However, these rising costs still strain household budgets, eroding the purchasing power of consumers and businesses. Even with slower price growth, affordability remains an issue, leading many households to rely more on credit to maintain their lifestyles. This reliance heightens vulnerability to interest rate hikes and rising product prices among already indebted consumers.

It’s important to note that these price increases are largely driven by external factors rather than domestic demand, including electricity supply issues, costs associated with alternative power generation, and rising import prices that are passed on to consumers. Additionally, the recent depreciation of the Rand following Donald Trump’s re-election may have some short-term effects on its value.

On a positive note, the US Federal Reserve recently lowered its interest rate by 25 basis points to stimulate the US economy. This move could benefit South Africa, allowing the South African Reserve Bank (SARB) and its Monetary Policy Committee (MPC) to potentially lower local interest rates more aggressively than originally planned.

With moderating inflation, better-than-expected economic growth, improved electricity supply, and positive market sentiment, the SARB is likely to consider cutting interest rates further in November 2024. Such a reduction might boost demand and ease pressure on household finances, contributing to stronger economic growth in South Africa than previously anticipated for 2024 and into 2025.

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More Coverage

Producer Price Inflation

October 2025
In October 2025, producer price inflation rose to 2.9%, an increase from 2.3% in September. However, on a monthly basis, there was a slight decline in producer prices, down by 0.1%.

Retail Sales Performance

September 2025
Retail sales in South Africa rose by 3.1% in September, slightly exceeding market expectations of 3.0%, as anticipated by analysts for that month. This growth indicates a continuing recovery in consumer demand within the economy.

SARB Lowers Interest Rates as Stability Improves

The South African Reserve Bank (SARB) has taken a prudent and measured step by reducing its base interest rate from 7.0% to 6.75%, marking a significant moment in the country’s monetary policy trajectory. This decision, made by the Monetary Policy Committee (MPC), underscores the bank’s cautious optimism about South Africa’s economic outlook amidst a complex global backdrop.

Consumer Inflation

October 2025
In September 2025, the Consumer Price Index (CPI) saw a modest rise to 3.4%, slightly up from 3.3% in August, yet just below the analysts’ forecast of 3.5%.

Why Aluma does not Force an Interest Cut

Cautious Optimism Amidst Inflation and Reform Momentum
As the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) prepares to announce its interest rate decision later this week, market watchers are closely divided between expectations of a modest cut and maintaining the status quo. With approximately 70% of economists foreseeing a 25-basis point reduction from 7.00% to 6.75%, the prevailing sentiment reflects confidence in economic stabilization. However, a significant proportion remain cautious, suggesting that the SARB may choose to hold interest rates unchanged for another month, given the current inflation trajectory and recent developments in fiscal discipline.
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