South Africa Inflation Slightly Surged to 3.4% YoY in September
Bottom Line: Statistics South Africa (Stats SA) announced on October 22 that annual inflation edged up to 3.4% YoY in September from 3.3% YoY in August due to accelerated housing, restaurant and utilities costs. Despite inflation is still within the South African Reserve Bank’s (SARB) 3%-6% target range, we think increases in utility costs, unpredictable outlook for the global economy, and climate-related agricultural disruptions will likely continue to pressurize prices in Q4, and we continue to foresee average inflation will hit 3.4% in 2025.
Figure 1: Policy Rate (%), CPI and Core Inflation (YoY, % Change), January 2023 – September 2025
Source: Continuum Economics
After hitting 3.3% in August, annual inflation ticked up to 3.4% YoY in September due to higher housing, restaurant and utilities costs. According to StatsSA announcement on October 22, annual housing and utilities prices surged by 4.5% YoY in September from 4.3% hike in August.
The upward swing was partially offset by food inflation, which fell from 5.2% to 4.5% YoY when compared with the previous month. The transport category recorded its thirteenth month of deflation, with the annual rate at -0.1% in September. Fuel prices declined by 0.3% between August and September while the annual rate for fuel was -2.2%.
MoM prices edged up by 0.2% after declining by 0.1% in August. Annual core inflation rate slightly surged by 3.2% in September, up from 3.1% in August. Despite inflation is still within the SARB’s 3%-6% target range, we think stubborn price pressures signal the uncertainty over the inflation outlook in the upcoming months since unpredictable outlook for the global economy, increase in utility costs, and climate-related agricultural disruptions will likely continue to pressurize prices in Q4.
Despite concerns, one good news for South Africa’s inflation outlook was the drop in inflation expectations in Q3. The Bureau for Economic Research’s (BER) latest survey for the South African Reserve Bank (SARB) demonstrated that five-year inflation expectations have slipped to 4.2% in Q3, down from 4.3% last quarter. In addition to this, the country has experienced few power cuts (loadshedding) in Q3, which was also positive for the outlook. Eskom announced on October 10 that the country has gone 147 consecutive days without loadshedding, with only 26 hours recorded between April 1 and 9 October 9, 2025. (Note: Some energy analysts think blackouts are still a threat and further power disruptions are likely).
Despite good news, it is worth mentioning that SARB thinks inflation could stay higher-than-expected in the near-term. Speaking about the inflation trajectory, SARB governor Lesetja Kganyago cautioned earlier this month that while inflation looks relatively contained, near-term overshoots are still expected.
Under current circumstances, we continue to foresee average inflation will hit 3.4% in 2025. We believe the keys for South African inflation trajectory will be the global developments, tariffs, oil prices and government’s determination to address the electricity shortages, logistical constraints and financing needs, heading towards 2026.