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This report covers the key data releases domestically and internationally over the past week, as well as updates on crucial structural reform initiatives. It is a shortened version of the more comprehensive BER Weekly Review (Enhanced version), which includes a detailed discussion on the main economic events and developments over the past week, a summary of upcoming data (the week ahead) and the BER’s forecast for key economic indicators. The full Weekly is only available to BER Essential Insights subscribers (which you can sign up for here) and BER Premium Insights clients.
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Headline consumer price inflation (CPI) accelerated to 3.5% y-o-y in July, from 3.0% in June. The outcome was slightly softer than our forecast but broadly aligned with consensus. The main drivers were food & non-alcoholic beverages (+5.7% y-o-y, adding 1.0%pt to the headline) and housing & utilities (+4.3%, 1.0%pt), with the latter boosted by annual municipal tariff hikes for electricity and water. Transport prices fell again (-1.7% y-o-y), though the decline was much shallower than June’s -3.3%, as the drag from fuel prices eased (-5.5% vs. -11.2%).
On a monthly basis, CPI jumped 0.9% (after 0.3% in June), reflecting both administered price adjustments and firmer food inflation.
Core CPI, which excludes food and energy prices, ticked up marginally to 3.0% y-o-y in July, underscoring still-muted underlying price pressures despite the headline lift.
Roy is taking a well-deserved break this week. If you missed it, you can find Impumelelo’s latest research on the SETA system, published late last week, here.
In July, the Fed maintained the target range for the federal funds rate at 4.25–4.5%. The Fed explained that, while Q2 headline growth was robust, indicators suggested a broader moderation in activity during the first half of the year. Inflation remained above target, and despite a softening labour market, uncertainty around both the price and economic outlook left the Fed in a wait-and-see stance.
The minutes of that meeting, released this week, add substantial nuance. They explicitly flagged tariffs as the root of inflation risk, but a key debate was whether these effects would be transitory or whether they risked keeping inflation elevated for longer. The minutes attributed much of Q2’s strength to the front-loading of imports ahead of tariff hikes. They warned that while firms were initially absorbing higher costs, more of the burden would likely be passed through to consumers, keeping inflation sticky.
On the labour market, participants highlighted declining dynamism, reflected in low hiring and low layoffs, concentrated job gains, weaker wage growth for job switchers, and reduced immigration. This pointed to resilience but also emerging vulnerabilities. The discussion also extended to financial stability risks.
The overall tone was highly cautious, reflecting risks to both sides of the Fed’s dual mandate of price stability and maximum employment. Importantly, there was dissent: Michelle Bowman and Christopher Waller preferred a 25bps cut, arguing that inflation was already near target once tariff effects were excluded and that delaying easing risked damaging the labour market.
Survey data reinforced this cautious picture. The S&P Global US Flash Composite PMI improved in August (55.1 to 55.4), with strong gains across manufacturing and services. However, selling price inflation reached a three-year high due to tariffs.
The S&P Global Flash UK Composite PMI rose from 51.5 to 53.0, driven by stronger services activity (51.8 to 53.6). Manufacturing remained in contractionary territory, with the Output Index unchanged at 49.5 and the Manufacturing PMI falling to 47.3. Input cost inflation rose due to domestic cost drivers, notably higher National Insurance contributions, payroll costs, food prices, and transport bills. In July, official inflation rose to a hotter-than-expected 3.8% y-o-y. Sticky inflation puts the Bank of England (BoE) in an uncomfortable position when deciding on (more) interest rate cuts.
The improvement in services was underpinned by better demand, while manufacturing contracted on weaker global orders, reflecting uncertainty over trade flows. Employment fell across both sectors, with firms citing restructuring under cost pressure. However, year-ahead expectations climbed to their highest level since October 2024, supported by expectations of stronger consumer spending and investment in services. Manufacturers remained cautious about global trade conditions but were hopeful of a rebound in demand.
The HCOB Flash Eurozone Composite PMI edged higher from 50.9 to 51.1, moving deeper into expansionary territory. The rise was led by manufacturing (49.8 to 50.5), which reached a 38-month high, while services also improved but at a slower pace. The gains reflected stronger new sales orders and ongoing job creation, though new export orders declined, another casualty of US trade policies.
Input costs rose at their fastest pace in five months, and firms passed these on to customers, resulting in higher output prices. Backlogs of work eased as hiring helped firms better manage workloads. Still, sentiment deteriorated: the year-ahead outlook fell to a four-month low across services and manufacturing.
Editor: Lisette IJssel de Schepper
Tel: +27 (0)21 808 9777
Email: lisette@sun.ac.za
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Friday, 22 Aug 2025
