South African households are facing the highest inflation in almost two years.
Although last weekend there was positive news of a memorandum of understanding between the US and Iran, which could lead to the reopening of the Strait of Hormuz, there will be no immediate relief from the negative impact on the price of petrol, diesel, oil and fertilizer.
Headline consumer inflation rose to 4.5% in May from 4.0% in April, according to data released by the statisticssa Confirmed on Wednesday.
This again takes price growth well above the South African Reserve Bank's 3% target.
Diesel costs increase due to closure of the Strait of Hormuz
This is due to a supply shock to global energy markets following the military closure of the Strait of Hormuz, a corridor that carries about a fifth of the world's seaborne oil.
Although talks between the primary players in the war, namely the US, Iran and Israel, have been positive over the past week, the shock has not subsided.
This is made worse by the fact that this war has reportedly ended multiple times this year alone.
South Africa Import Most of its fuel is refined, which leaves it vulnerable to marine disruption. The closure led to a 14.3% monthly increase in domestic fuel index and increased by 28.7% during the year.
Local petrol prices have risen 24.8% in 12 months.
Commercial diesel, which is lighter regulated and relies more on imports, rose 53.8%, pushing up operating costs in freight and logistics.
There has been some relief in food costs
StatsSA data shows concentrated growth in specific parts of the consumer basket.
Food inflation slowed to 1.9% and meat price growth slowed to 7.3%, supported by strong agricultural supplies.
The key figure of 4.5% is lower than economists' earlier estimate of 4.7% bloomberg Report.
Note that food prices rise only after supply chain disruptions (such as less fuel for trucks).
Any sustained increase in fuel inflation will therefore likely continue to impact other aspects of the South African economy if it remains at high levels.
The South African Reserve Bank's decision this July
The narrow gap, along with diplomatic progress on an interim deal to reopen maritime trade through the strait, changes the near-term outlook for monetary policy.
Reserve bank On May 29, the benchmark repo rate was raised by 25 basis points to 7.0%, its first increase since 2023.
In line with most economists' forecasts, the soft print now leaves room for the Monetary Policy Committee to meet on July 23.
If the conflict drags on, the bank has left the door open to taking more strict action.