Annual consumer inflation slowed marginally in August to 3.1%, data from Stats SA showed on Wednesday.

Inflation — as measured by the consumer price index (CPI) — was slightly down from July’s reading of 3.2% and came as SA moved into level 2 of lockdown in mid-August, making more goods and services available as the economy opened up further.  

The outcome was largely in line with expectations that inflation would stay at 3.2%, according to a Bloomberg survey of 14 economists.

The largest contributors to the annual inflation rate were food and nonalcoholic beverages; housing and utilities; and miscellaneous goods and services, Stats SA said.

However, food and nonalcoholic beverages, which make up more than 17% of the CPI basket, hit a seven-month low at 3.9%, the agency said.  

The monthly increase in prices was 0.2%, with the main contributor coming from the transport category after a rise in fuel prices.
Inflation has been at or below the midpoint of the SA Reserve Bank’s 3%-6% target range for 21 months. After breaching the lower level of the range in May and June, inflation picked up to 3.2% year on year in July but the outlook for prices remains muted.

In its latest rates decision, the Bank revised down its inflation forecast, expecting it to average 3.3% in 2020, 4.0% in 2021 and 4.4% in 2022.

With the economy expected to contract more than 8% in 2020, according to the Bank’s estimates, demand has flagged as consumers face rising job losses and income cuts as a result of the lockdown.

The Bank has nevertheless paused the aggressive rate-cutting cycle it launched to support the economy through the worst of the Covid-19 crisis, leaving the benchmark rate unchanged at its last meeting at a record low of 3.5%.