South Africa’s Producer Price Index (PPI) for November 2024 continued its deflationary trend, recording a -0.1% y/y decline,. This was consistent with the October reading, which was the first deflationary result since the series began in 2012. Month-to-month, the PPI remained flat, reflecting subdued inflationary pressures on the supply side and falling short of market expectations for a slight 0.2% increase. This environment suggests a deceleration in CPI inflation, potentially easing cost-of-living pressures and supporting expectations for three 25bp interest rate cuts by the SARB in 2025. However, risks such as rising fuel costs and accelerating inflation in intermediate goods could reverse this trend over time, feeding into higher CPI. Despite these risks, the current inflationary landscape presents an opportunity for policymakers to consider lowering the inflation target, fostering sustainable price stability without necessitating major changes to monetary policy.

South Africa faces significant economic challenges that demand structural reforms across various sectors, particularly in the labour market. The economy has experienced a troubling decline in employment, with 133,000 formal jobs lost quarter-on-quarter and a total of 294,000 jobs lost year-on-year in Q3, primarily due to reductions in part-time roles. Government employment also dropped significantly, with 129,418 jobs cut in the last quarter, following a pre-election hiring surge. These developments exacerbate the already critical issues of high inequality and unemployment, highlighting the structural barriers to job creation in an economy struggling to keep pace with a growing population. Addressing these challenges requires decisive reforms to promote skills development, labour market flexibility, and investment in sectors that can generate sustainable employment.