The average inflation expectations of analysts, business people and trade unions declined again during the third quarter survey. They now expect headline inflation to be 5.1 per cent this year, before subsiding to 4.8 per cent in both 2025 and 2026. Craig Lemboe, Deputy Director of Bureau for Economic Research joins CNBC Africa for more.
The average inflation expectations of analysts, business people and trade unions declined again during the third quarter survey. They now expect headline inflation to be 5.1 per cent this year, before subsiding to 4.8 per cent in both 2025 and 2026. I'm joined by Craig Lemboe, Deputy Director of BER. Craig, thank you so much for joining us. Take us through what the numbers are. For me, really interesting to see the overall inflation, but also to see the difference between analysts and business people. But paint a quick overview for us of what the key numbers are on these expectations. Thank you, Zanelle. Yes, an interesting set of numbers, as you mentioned. Inflation expectations in the third quarter is down from what we saw for this year and next year, and into 2026, down from what we saw in the second quarter numbers. 5.1 per cent this year, 4.8 per cent for next year and for 2026 is a bit, a change from last quarter. And again, if you look at the distribution between the three sort of social groups that we survey, analysts, business people and trade unions, we are seeing that across the board, the inflation expectations have softened, but analysts do see much lower inflation coming through than their business people and trade union peers. And it's sort of an important insight, I think, especially as we run into interest rate meetings next week from the SOB, and they use this as a crucial input to their decision-making process. We don't believe that it would change the view around that there is, or the expectation that there's going to be a cut. We can't dispense 25 basis points on the repo rate. It does increase the likelihood of a 50 basis point cut, but we've not sort of tilted our needle in that direction as yet. And let's look at households. Households think prices will rise more sharply in the short term. So they're quite an upward expectation from 6.9 per cent for next year and the long term, 10.6 per cent. It's an interesting sentiment that consumers have. And if I recall correctly, there's a difference between what I expect out of my own sentiment for myself versus my sentiment for what's happening externally, which is often coming across as more negative. How is this going to influence consumer behaviour? So consumers are typically on the high end of the spectrum when it comes to inflation expectations. We were sort of caught off guard with the uptick that we saw this quarter. But as you mentioned, there are some very individual factors that play into households' consumption expenditure. And in this particular survey round, which we conducted from the middle to the end of August, it was a period when you would start to see some of those municipal price increases come to the fore in terms of water provision, in terms of the provision of municipal electricity. So those factors may have been top of mind when consumers filled in this particular survey. And we know the purpose of inflation expectations is to gauge whether or not consumers are likely to spend now instead of later to avoid potential price increases. I don't think this, particularly the results, suggest that. As we know, consumers are under quite a bit of pressure from an income perspective. So that particular levers may not be as obvious this time around. And I like the diplomatic way you put it. I basically would call it the municipal shakedown that consumers are experiencing. But trade unions are expecting wage increases. And again, interesting how much they're expecting, despite the kind of inflation that we are facing. How tempered are these results of what trade unions believe is due to consumers or to workers? So a very interesting dynamic is that trade unions also saw inflation expectations come down, but they've not adjusted their wage expectations to meet a sort of lower inflation environment that they themselves predict. We do know that trade unions are on the upper end of the inflation expectation spectrum, sometimes ideologically so. But it's not out of guilt with what we've seen so far around what trade unions have been requesting. If you look at the public service union requesting, I think it was 12.5%, the municipal workers union settling on 6%, all of these are above inflation and above their own inflation expectations. So I think there is a bit of a disconnect. But yes, on the headline inflation expectation numbers, the overall print is a positive. And I think they're just playing their job, they're playing their role well there, Craig, because it is their job to hopefully expect higher wages for workers. Thank you so much for your time. Basically, what we're hearing is that inflation is expected to cool a little bit, we are seeing a little bit of economic growth, and wages could possibly increase. Thank you for your time. That was Craig Lambert, Deputy Director of BER. And that's it for our story. And Craig is the Deputy Director of the Bureau of Economic Research.
Theme: Decline in Inflation Expectations and Implications for Economic Decision-Making
The Bureau for Economic Research (BER) recently released their third-quarter survey results, indicating a decline in the average inflation expectations among analysts, business people, and trade unions. The survey projects headline inflation to be 5.1 per cent for the current year, with expectations of a decrease to 4.8 per cent in both 2025 and 2026. Craig Lemboe, Deputy Director of BER, joined CNBC Africa to discuss the key findings of the survey. Lemboe highlighted the notable decrease in inflation expectations compared to previous quarters. The numbers show a decline from the second-quarter figures, with a forecast of 5.1 per cent for the current year and 4.8 per cent for the following years. A closer look at the survey data reveals varying inflation expectations among different groups surveyed. Analysts, business people, and trade unions all expect softer inflation figures, although analysts predict lower inflation rates compared to their counterparts. The insights provided by the survey results hold significant importance as the South African Reserve Bank (SARB) prepares for upcoming interest rate meetings. The data serves as a crucial input for the decision-making process surrounding potential rate cuts. While there is a growing possibility of a 50 basis point reduction, Lemboe maintained that a 25 basis point cut remains on the table. Households, on the other hand, anticipate a more substantial increase in prices, with short-term expectations at 6.9 per cent for next year and a long-term projection of 10.6 per cent. Lemboe acknowledged the impact of individual factors on household expenditure, noting that recent municipal price hikes likely influenced consumer sentiment during the survey period. Despite expectations of rising prices, the survey results suggest that consumers may not adjust their spending behavior significantly, given existing financial pressures. Trade unions, while also revising their inflation expectations downwards, have not aligned their wage increase projections with the anticipated lower inflation rates. This discrepancy between inflation forecasts and wage demands indicates a disconnect within the labor market. Despite the overall positive trend in headline inflation expectations, trade unions continue to advocate for wage hikes that surpass inflation rates. In conclusion, the survey findings paint a picture of cooling inflation, modest economic growth, and potential wage increases in the foreseeable future. The dynamics between inflation expectations, consumer behavior, and labor market demands underscore the complex interplay of factors shaping South Africa's economic landscape.
"The insights provided by the survey results hold significant importance as the South African Reserve Bank (SARB) prepares for upcoming interest rate meetings."
BER, inflation expectations, analysts, business people, trade unions, South African Reserve Bank, interest rates, household expenditure, wage increases, economic growth, consumer behavior, labor market, South Africa