South Africa’s inflation surges to 7.4%

Annual consumer inflation spiked to 7.4% in June, from 6.5% in May, Stats SA reported on Wednesday.

The June rate is the highest inflation recorded since May 2009 (8.0%), following the global financial crisis.

Consumer prices increased by 1.1% from May to June, reflecting much pricier fuel. Fuel prices were 45.3% higher in June than the year before - the biggest increase on record.

Prices of food and non-alcoholic beverages surged by 8.6% year-on-year in June. Stats SA says this is the highest rate since March 2017, when South Africa was hit by a severe drought.

Bread and cereal products were 11.2% more expensive than a year before. In a single month, maize meal prices rose by 5.2%, while prices for brown bread (3.2%) and macaroni (3.0%) also rocketed.

Meat prices increased by 9.5% in the year to June, with polony 19% more expensive than a year ago, Stats SA reported.

Prices for oils and fats were almost 33% higher than a year before.

Inflation is now far above the South Africa Reserve Bank's (SARB) inflation target range of between 4% to 6%, and may convince the monetary policy committee to hike interest rates by a heftier margin on Thursday.

The consensus expectation is a hike of at least 50 basis points, while some economists think a 75-basis points increase is likely.

The June inflation rate came in above expectation, with 7.3% the median forecast among 17 economists polled by Bloomberg. -Fin24