Consumer inflation data will be the prime focus of local markets this week, with economists warning that the consumer price index (CPI) is likely to experience its highest growth rate in almost a year as a result of the weak rand exchange rate and elevated oil price.

The CPI for July will be released by Stats SA on Wednesday. It will likely rise to 5% or slightly higher, from 4.6% year on year in June, mostly due to municipal tariff increases and base effects involving food and fuel.

This time in 2017, SA enjoyed fuel price cuts.

In July 2018, fuel prices climbed almost 2% compared to the previous month.

Food and fuel prices aside, core inflation is expected to remain well behaved given that the weak growth environment limits the ability of producers to pass their rising input costs on to consumers.

BNP Paribas economist Jeff Schultz expects core inflation to have inched up from 4.2% year on year in June to 4.3% year on year in July.

"With underlying price growth still below the mid-point of the 3%-6% inflation-target range we don’t think that this is likely to spark fears of demand-driven inflationary pressures creeping back into the economy," he says.

Novare economic strategist Tumisho Grater expects consumer inflation to trend higher over the rest the year, but remain within the 4.5%-5% range. The residual effects of the VAT hike, higher fuel prices, rand depreciation and rising food prices are all likely to push up inflation in the next months, she says.

Food price inflation is expected to increase until the end of 2019, stabilising at about 5.5%, according to the Bureau for Food and Agricultural Policy’s latest baseline report.

The combination of rising oil prices coupled with a depreciating exchange rate means farmers must cope with higher fuel and fertiliser costs despite the good maize harvest.

Grater notes that weak domestic demand and high unemployment should translate into very modest price growth of durable and semidurable goods, as well as more subdued services inflation over the next few months.

If so, inflation could surprise on the down side.