by AKANI CHAUKE
JOHANNESBURG, (CAJ News) – JULY’S decline in domestic fuel prices offers welcome relief to South African consumers, although the full inflationary impact of the sharp second-quarter fuel price surge is still expected to filter through the economy in the months ahead, according to independent economist John Loos.
Domestic fuel prices for July 2026 have fallen significantly, with petrol prices declining by approximately R2 per litre and diesel by between R3,14 and R3,59 per litre.
This drop is expected to provide some near-term moderation in Consumer Price Index (CPI) inflation and ease pressure on household budgets.
Loos noted that Gauteng’s petrol price inflation rate has slowed markedly year-on-year, from 31,6% in June to 19% in July, suggesting that CPI inflation may begin to ease in the short term.
However, he cautioned that consumers are unlikely to feel the full benefit immediately, as earlier fuel price increases continue to work their way through supply chains.
The outlook for further fuel price relief remains uncertain and is heavily dependent on geopolitical developments, particularly tensions between the United States and Iran in the Gulf region.
Brent crude oil, which stood at around $95 per barrel on 1 June, had fallen to approximately $73 per barrel a month later, driven by expectations of a potential resolution and the reopening of the Strait of Hormuz.
Loos said he expected Brent crude to remain in the $70–75 per barrel range in the near term, provided tensions do not escalate further, which could open the door to additional domestic fuel price cuts.
He added that US domestic political considerations, including inflation pressures ahead of mid-term elections, may encourage Washington to pursue a stabilisation of global oil supply, further supporting lower prices.
Despite the recent fuel price relief, Loos warned that the inflationary impact of April and May’s fuel price hikes has not yet fully fed through into consumer prices.
While households experienced immediate pressure at the pumps, producers who rely on fuel as an input are still in the process of passing higher costs on to consumers.
He also expects June’s CPI data, due in mid-July, to show a noticeable increase compared with May’s 4,5% year-on-year reading, driven by higher fuel inflation and anticipated increases in public transport fares.
Monetary policy remains finely balanced. While rising inflation expectations and recent price pressures could justify a further interest rate hike at the South African Reserve Bank’s Monetary Policy Committee meeting later in July, Loos believes the recent decline in oil prices may allow the Bank to adopt a more cautious, wait-and-see approach, keeping rates unchanged.
He noted that inflation expectations rose to 4,4% in the second quarter survey, up from 3,6% in the first quarter, underscoring persistent risks.
However, he expects the Reserve Bank to prioritise forward-looking indicators, particularly if oil prices remain contained.
Looking ahead, Loos anticipates interest rates will remain steady for the rest of 2026, with the possibility of modest cuts resuming in 2027.
He added that South Africa’s household sector is likely to experience slower consumption growth this year, with real household expenditure forecast at 1,7%, down from 3,6% in 2025.
While near-term conditions show signs of improvement, he cautioned that 2026 is likely to remain a more challenging year for consumers overall, particularly as housing demand growth softens during the winter months before recovering later in the year.
– CAJ News