Today, the local data card will be headlined by CPI and retail sales numbers for November and October, respectively. Recall that CPI inflation slowed significantly in October, with headline inflation at 2.8% year-on-year, driven by sharp fuel price deflation and a deceleration in food inflation. However, as base effects fade, inflation is expected to rise slightly in the coming months, though from a lower-than-anticipated starting point. This softer inflation trajectory supports the potential for further SARB rate cuts next year, aligning with market expectations of three additional 25-basis-point reductions.
As for retail sales, recall that recent prints have reflected signs of cautious optimism, maintaining growth for seven consecutive months as easing inflation, lower interest rates, two-pot retirement withdrawals, and increased optimism surrounding GNU reforms have supported demand. Despite this, the gains remain incremental, with retail growth expected to improve modestly to 2.0% year-on-year, signalling green shoots rather than a full recovery.
Internationally, US CPI is on the cards. Although US inflation has been moderating throughout 2024, the data showed a slight uptick in October, rising to 2.6% y/y, driven by higher food and transportation costs. Core inflation, excluding food and energy, remained elevated at 3.3% y/y, reflecting persistent price pressures in services. Risks to upside pressures include rising oil prices and geopolitical tensions, which could complicate Federal Reserve policy decisions. Markets expect November’s CPI to edge up to 2.7%. A lower-than-expected reading will boost equities and weaken the dollar, while an upside surprise may raise Treasury yields and strengthen the dollar as markets adjust rate-cut expectations ahead of the December FOMC meeting