The news that South Africa’s inflation rate turned around from its upward trend since the beginning of the Iran/US conflict caught share prices and the rand exchange rate off guard to the upside last week.
The annual inflation rate in July 2026 was 4.3% in July 2026, down from 5.0% in June 2026.
It was expected that the annual rise in the CPI during July 2026 would be around 5.3%. The US Senate last week approved that the African Growth and Opportunity Act (AGOA) will be renewed for another two years.
The AGOA is a United States trade agreement enacted in May 2000 to provide eligible sub Saharan African nations with duty free access to the US market for thousands of products.
For South Africa, this inclusion provides vital regulatory continuity and relief for key exporters, though broader structural trade frictions and separate high tariffs remain in place.
Especially specific agricultural exporters (such as citrus, macadamia nuts, and certain fruit juices) benefit from continued framework stability alongside recent US exemptions on select food items.
Together with a strong surge in precious metal prices, especially gold and platinum, the sudden drop in the inflation rate, the ALSI on the JSE improved by 3 849 (3.4%) last week, bridging the 118 000 level again, the first time in four months (22 April 2026).
The price of gold increased last week by $254/ounce to $4 630, the highest since 19 March 2026. The platinum price jumped $140 to R21.84/£ and against the Euro by $1 896.
The rand/$ is back to pre war levels, but diesel price expectations increase sharply
The Rand exchange rate closed Friday (16.01/$) at its strongest level since the day before the US/Iran war (R15.96/$), gaining 18 US cents since the previous Friday.
Against the £ the currency appreciated by 5 cents to R21.84/£ and by 3 cents against the Euro to R18/70/€. Despite this strong recovery against the US$, the sharp increase last week in the oil price of $6 per barrel to $93.50 had pushed up the under recovery for diesel to R2.87 per litre and for 95 ULP petrol by 93 cents per litre.
If these prices continue next week, motorists will pay up to R29.04 per litre for diesel, against R19.44 per litre a year ago.
For 95 ULP motorists will have to pay R26.51 per litre in Gauteng.
This represents an increase of R4.96 per litre over the last year. Given the weight of fuel in the inflation basket, it may contribute to an increase of more than 0.4% alone in the inflation rate for August 2026.
Prospects for the coming week
The release of South Africa’s producer inflation (PPI) data for July 2026 this coming week will be of interest.
It is expected that the annual increase in the index will be 7.2% against 7.5% in June 2026.
This expected decrease will mostly be due to lower increases in imported input costs on the back of a stronger rand in July.
On global markets, the release of the second estimate of the US GDP economic growth for Q2 on Wednesday will be the main indicator giving direction to risky assets. It is expected that the US economy has grown by 1.5% in Q2.
This is a strong decrease from the annualised growth rate of 2.1% recorded for Q1 2026.
If this number realises, sentiment against the dollar will lead to a bigger demand for safe haven assets like gold, and the rand exchange rate will strengthen further. The announcement of the US personal income and expenditure data for July on Wednesday will also be of interest.
Chris Harmse is the consulting economist of Sequoia Investment Solutions and a senior lecturer at Stadio Higher Education.
**The views expressed do not necessarily reflect the views of the National Media Group.