BER: Inflation expectations fall further in Q3’24

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.