Consumer inflation unchanged in February

Annual consumer inflation held steady at 3.2% in February 2025, unchanged from January, Stats SA data showed on Wednesday.

However, month-on-month inflation accelerated sharply to 0.9% (up from 0.3%), reflecting increased cost pressures in key categories, particularly fuel, financial services and food.

Hospitals and inpatient care facilities, including medical aids, were surveyed in February.

The February consumer price index (CPI) print came in lower than expected by some analysts. Absa had projected an increase to 3.4% year on year, citing expected pressure from fuel and health insurance, while the Bureau for Economic Research (BER) forecast a steeper rise to 3.7%. Nedbank, however, had expected inflation to remain at 3.2% in line with the actual data.

Absa economists noted core inflation was 1.1% month on month, and 3.4% year on year — down from 3.5% previously, which highlights the benefits from prevailing base effects.

Stats SA CPI operations director Lekau Ranoto said recreation, sport and culture, food and nonalcoholic beverages, alcoholic beverages and tobacco and communication recorded higher annual inflation rates in February.

“Inflation cooled for several product categories, most notably personal care and miscellaneous services, health, restaurants and accommodation, furnishings, household equipment and routine maintenance and transport,” she said.

Fuel prices surged by 3.9% month on month, after an 82c/l petrol price increase at the beginning of February.

However, on a year-on-year basis, fuel prices were still 3.6% lower than in February 2024, helping to cap overall inflation.

Food inflation accelerated to 2.8% year on year (from 2.3% in January), driven by rising prices for cereals (up 3.9% year on year), fruit and nuts (up 6.8% year on year), and nonalcoholic beverages (up 8.5% year on year). Meat prices were flat year on year, while vegetable prices fell slightly.

According to Anchor Capital economist Casey Sprake, the acceleration was primarily driven by a sharp increase in maize prices, with maize meal inflation reaching a 17-month peak and samp hitting a 19-month high.

“The maize meal price index climbed 10.6% year on year, while samp saw an even steeper rise of 18.7%,” Sprake said.

In terms of retail prices, a 5kg bag of maize meal cost R74.91 in February, up from R68.52 a year earlier, while a 1kg pack of samp increased to R22.86 from R19.28 over the same period.

“A prolonged regional drought constrained maize harvests, driving up import demand from neighbouring countries and putting further upward pressure on prices. However, recent rainfall has begun to ease supply concerns, leading to a moderation in maize prices.”

Housing and utilities inflation was 4.4% year on year, contributing 1.0 percentage point to the overall CPI. This was mainly driven by electricity, gas and other fuels, which rose 11.9% year on year.

Insurance and financial services costs spiked by 6.0% month on month, with insurance alone surging 7.7%, making it a significant driver of the sharp monthly increase.

Health costs climbed 2.6% month on month, particularly for health services (5.0% month-on-month increase), reflecting rising costs in hospital and outpatient care, which were surveyed in February.

While inflation remains within the Reserve Bank’s 3%-6% target range, the acceleration in inflation on a monthly basis may influence expectations for the Bank’s interest rate decision on Thursday.

“While the overall inflation print remains within expectations, inflationary pressures are building,” Sprake said.

“In the first quarter of this year, survey respondents revised their forecast for headline consumer inflation in 2025 downward to 4.3% (from 4.5%), but they anticipate a gradual rise to 4.7% by 2027. Over the next five years, inflation is expected to stabilise at 4.7%, slightly above the Reserve Bank’s preferred midpoint.

“The near-term inflation outlook is benign and our updated forecast for headline inflation is 3.7% in 2025, down from the previous forecast of 4.0%,” Jee-A van der Linde from Oxford Economics said.

“Our projections suggest that CPI inflation will trend sideways over the coming months before gradually increasing in the second half of 2025.”

He says updated inflation expectations for the first quarter of 2025 show that “South Africans anticipate lower inflation this year (4.3% vs 4.5% previously) and continue to expect inflation will average 4.6% in 2026.”

Sprake added that compounding inflationary risks was the government’s recent announcement of a 0.5 percentage point VAT increase, which could add further upward pressure on prices and could weigh on consumer spending and household budgets.

These risks would be likely to prompt the Reserve Bank to adopt a cautious approach, opting to keep the repo rate at 7.50%, she said.

Update: March 19 2025
The story has been updated with comment from an economist.

marxj@businesslive.co.za