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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
July 23, 2025

Consumer Inflation

June 2025

In June 2025, the Consumer Price Index (CPI) rose slightly from 2.8% in May to 3.0%. This figure was marginally higher than the 2.9% forecasted by analysts for the month.

The 3.0% increase in CPI was primarily driven by:

  • Housing and Utilities: Up 4.4%, contributing 1.0 percentage point.
  • Food and Non-Alcoholic Beverages: Up 5.1%, adding 0.9 percentage point.
  • Alcoholic Beverages and Tobacco: Up 4.4%, contributing 0.2 percentage point.

On an annual basis, inflation for goods increased to 2.3%, up from 1.8% in May. Meanwhile, services inflation rose slightly from 3.6% in May to 3.7% in June. Despite this slower pace of price growth, inflation continues to erode household purchasing power across South Africa. Consequently, many households are increasingly reliant on short-term credit to maintain their lifestyles and consumption habits. This dependence makes households more vulnerable to fluctuations in interest rates and currency values, which in turn influence prices domestically.

The Monetary Policy Committee (MPC) is expected to hold interest rates steady during its July meeting. However, some rate reductions are anticipated later in 2025. These potential cuts have been supported by relatively low inflation levels, a stable Rand/Dollar exchange rate thus far, and decreases in international oil prices from May through June 2025.

Lower interest rates introduced late 2024 and early 2025 are expected to stimulate demand by increasing household disposable income after interest payments, potentially supporting overall economic growth. This is reflected in retail sales figures for May 2025.

Nevertheless, the Reserve Bank remains cautious amid ongoing global uncertainties. Concerns about inflation, the lingering US-China tariff war, and the possibility of additional tariffs on BRICS nations could impact price stability moving forward. Future interest rate decisions will likely be influenced by factors such as moderate inflation, sluggish economic growth, improvements in electricity supply, and positive market sentiment.

Ultimately, maintaining price stability remains a top priority as South Africa enters the second half of 2025.

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Manufacturing Production

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In August, South Africa’s manufacturing output further declined by 1.5%, following a 1.3% decrease in July. This downturn was significantly below market expectations, which had forecasted a 0.3% increase for August. The Purchasing Managers’ Index (PMI) also fell by 1.4 points, from 50.8 in July to 49.5 in August 2025, indicating a less favourable business climate anticipated by manufacturers for the month.

Reviving South Africa’s Economy

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Gold and Foreign Exchange

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Private Sector Credit Extension (PSCE)

August 2025
In August 2025, credit demand grew by 5.9%, slightly below the anticipated market prediction of 6.0% for the month. Since the initiation of interest rate cuts in September 2024, there has been a noticeable acceleration in overall credit growth, with most subcategories showing increases, particularly in July.

Internation Trade and Trade Balance

August 2025
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