June 22, 2022 08:21 GMT
- South African CPI accelerated 0.6pp to a rate of 6.5% y/y in May, following +5.9% y/y in April. This breaks above the SARB's target range of 3-6%, after testing the upper bound for the last six months. A more modest 0.4pp uptick was forecasted by consensus.
- This is the highest inflation since January 2017, when CPI reached 6.6% y/y.
- The key upwards drivers were food and non-alcoholic beverages (+7.6% y/y), housing and utilities (+4.9% y/y), transport (+15.7% y/y) and miscellaneous goods and services (+3.9% y/y).
- Taking weighting into account, transport and food accounted for over half of total inflation, with the transport category responsible for 2.1pp. Soaring fuel prices were a key contributor, accounting for 1.4pp of headline CPI alone.
- Food prices saw a 2.1% m/m increase in May, the largest month-on-month jump since the February 2016 drought.
- With fuel costs set to continue to soar, pressure is building on the SARB to hike again by 50bp at the July 21 meeting, with a 75bp hike not off the table.