Inflation drops to 3.4% in December 2024, driven by lower food and transport prices

Inflation in December 2024 decreased to 3.4% year-on-year, down from 5.3% in December 2023. The decline was primarily driven by lower food and transport prices, although higher housing and utility costs partially offset the reduction. On a month-on-month basis, inflation rose slightly from 3.0% in November to 3.4% in December, largely due to higher food prices and mild transport deflation.

FNB Economist Helena Mboti explained the factors behind the inflation changes, noting, “The decrease in inflation was mainly driven by lower transport, food, and alcohol prices, with transport inflation remaining negative due to lower global oil prices. Food inflation continued to trend downward, although it remained sticky at 6.2% compared to the average of 5% throughout 2024.”

While food inflation showed signs of improvement, housing, water, and utility costs increased due to rising rental and repair prices, putting upward pressure on the overall inflation rate.

Core inflation, which excludes volatile food and energy prices, remained steady at 3.8%, signaling persistent inflationary pressures outside of these categories.

Looking ahead, Mboti predicts that inflation will rise slightly to 3.6% in January 2025 and reach 4.0% by December 2025. “We expect inflation to continue rising, with oil prices and food prices remaining key factors to watch. If oil prices increase or geopolitical tensions flare up, inflation could exceed expectations.”

Despite the projected increase, Mboti indicated that inflation could remain below 4% for much of 2025, provided global oil prices remain stable and geopolitical tensions do not escalate. “If global oil prices and geopolitical risks remain contained, inflation could stay relatively manageable for most of the year,” she concluded.

This ongoing inflationary environment will continue to be influenced by both domestic and global factors as the economy moves through 2025.