(Bloomberg) -- South African fuel prices will drop to the lowest level more than 2 1/2 years on Oct. 2, boding well for the country’s inflation outlook.
The retail price of 95-octane gasoline in Gauteng, the country’s economic hub, will decline to 21.05 rand ($1.23) per liter from Oct. 2, the Department of Mineral Resources and Energy said in a statement on Monday. That’s 18% less than October last year and the lowest since February 2022. The wholesale price of diesel will be 26% lower.
Lower international oil prices and a rand that gained against the dollar in September drove the decline. With fuel directly accounting for almost 5% of South Africa’s inflation basket and indirectly affecting the cost of most consumer goods, the drop could lower the expectations for price growth.
What Bloomberg Economics Says...
Annual price gains will likely fall further in September on the back of the decrease in fuel prices, helping make current inflation levels sustainable. Lower fuel prices are an additional tailwind for the South African consumer, supporting the nascent recovery in household consumption.
— Yvonne Mhango, Africa economist
Annual inflation decelerated to 4.4% in August, the slowest pace of increases since April 2021. It’s below the midpoint of the central bank’s target range of 3% to 6%, with policymakers saying earlier this month that they see the rate dropping further to average 3.6% in the last quarter of this year.
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