By Koketso Mano
Consumer inflation ticks up at the end of 2025
Headline inflation lifted to 3.6% y/y in December from 3.5% in November. The print is aligned with our and the market expectation. Monthly pressure was 0.2%, mainly upheld by rising services costs as well as higher fuel prices.
Core inflation was 0.1% m/m and 3.3% y/y, up from 3.2% previously. Services inflation recorded 0.3% m/m, and 4.2% y/y. Core goods inflation was -0.4% m/m and 1.2% y/y.
Average fuel prices lifted by 1.6% m/m and were 0.6% higher than at the same time in 2024.
Food and NAB inflation was unchanged at 4.4% y/y. Average prices posted monthly pressure of 0.2%. This reflected meat price inflation that was mitigated by contractions in fresh produce prices.
On average over 2025, headline inflation was 3.2%, down from 4.4% in 2024. Core inflation was 3.2% after recording 4.3% in 2024, while food and NAB inflation decelerated slightly to 4.1% from 4.4%. Fuel posted stronger deflation, -5.8% versus -0.8%, and electricity and other fuels eased to 9.9% from 13.2%.
Outlook
Updating our model with this print suggests that headline inflation will soften over much of this year, starting with a deceleration to below 3.5% y/y in January. This will be supported by the fall in fuel prices, while food and core inflation could be relatively stable.
As the year progresses, projected growth in the oil market surplus and a supported rand should keep fuel prices contained while also extending to overall imported, transport, and food costs. In addition, the current downward pull on cereal and vegetable prices presents downside risk to food inflation in the near term. In line with this, we note the risk that goods inflation is softer than anticipated.
Services inflation continues to normalise, but the pace could be softened by surveyed inflation expectations that have moderated – even those of price-setting agents. This should be encouraging to the Monetary Policy Committee (MPC) but the pace at which they foresee further narrowing of the gap between expectations and the target will determine how quickly they ease monetary policy. We predict that they will stay put at the upcoming January meeting but the risk of earlier moves this year are material. Policy will be more conservative if adverse shocks to inflation or risk premia occur.
The January inflation print is scheduled for release on 18 February. The periodical surveys to note in the January print include funeral and housing insurance (1.73% in CPI) and games of chance (1.61%).
