You don’t experience inflation in percentages – you feel it at the checkout.
That moment when the total flashes on the card machine tells a more honest story than any spreadsheet ever could. It is there, between the bread and the electricity token, that inflation stops being abstract and starts being personal. South Africa’s latest Consumer Price Index (CPI) data confirms this lived reality: inflation is no longer roaring, but it is far from silent. As Milton Friedman once observed, “Inflation is taxation without legislation.” For many South African households, that quiet tax is still being paid every month. Inflation may be easing, but thinking beyond the headline reveals why so many households still feel under pressure.
The headline number looks calm – but households don’t live in averages
In December 2025, headline inflation stood at 3.6% year-on-year, comfortably within the South African Reserve Bank’s target band. On the surface, this suggests that price pressures are under control. But CPI is not experienced as an average. It is experienced through essentials – and that is where the pressure remains concentrated. This divergence is neither new nor fleeting. As Figure 1 shows, inflation in essential categories has remained persistently higher than the headline rate over time, even as overall inflation has moderated.
Figure 1: Headline CPI vs Inflation in essential categories over time
Essential items continue to drive price increases
Food and non-alcoholic beverages increased by 4.4%, outpacing headline inflation. Meat prices, in particular, continue to rise at double-digit rates in several provinces, while cooking oils and cereals remain volatile. Seasonal relief in fruit and vegetables offers only partial comfort. For lower- and middle-income households – where food accounts for a much larger share of monthly spending – inflation does not feel like 3.6%. It feels materially higher.
- Utilities tell a similar story. Housing and utilities rose by 4.9%, driven not only by rental costs but by electricity, water, refuse removal, and other municipal services. These are non-negotiable expenses; households cannot substitute away from them. The result is a growing share of income being absorbed simply to keep the lights on and the taps running.
- Healthcare costs continue to climb steadily, while insurance and financial services rose by 7%, one of the fastest-growing CPI categories. These increases are often less visible day to day, but they quietly tighten monthly cash flow.
Why inflation still feels high: the structure of the CPI basket
Economists describe this pattern as regressive inflation: when price increases are concentrated in essential goods and services that make up a larger share of spending for lower- and middle-income households. In other words, even as headline inflation moderates, perceived inflation remains elevated because households spend most of their money on items that continue to rise faster than the average.
Some moderation is visible in discretionary categories. Clothing, footwear, appliances, electronics, and communication services show slower price growth or even outright declines, supported by competition, discounting, and technological substitution. But this relief is limited. These categories carry lower weights in the CPI basket and form a smaller portion of monthly expenditure. Lower prices on data bundles do little to offset rising food bills and municipal charges. The reason this imbalance matters is straightforward: essential categories occupy a large share of what households actually spend. Figure 2 illustrates how much space these items take up in the CPI basket.
Figure 2: CPI basket by weight (headline CPI divisions)
How households are adjusting – and the cost of coping
The impact on household behaviour is becoming increasingly clear. Disposable income is being squeezed as essentials absorb more of each pay cheque. Households are trading down to cheaper food options, reducing protein consumption, and postponing healthcare- and education-related expenses. Discretionary spending is being compressed, with entertainment, travel, clothing purchases, and home upgrades increasingly deferred. There are also growing signs of financial strain. Reliance on short-term and informal credit is rising, debt stress is becoming more pronounced, and vulnerability is increasing among low-income households, informal sector earners, pensioners, and grant recipients. Payment arrears for municipal services and transport costs are becoming more common.
What the CPI is really telling us
The data send a clear message. Inflationary pressure in South Africa is no longer broad-based – but it is deeply embedded in essentials. That is why households remain under strain even as the headline number improves.
And so we return to the checkout. The CPI may say 3.6%, but the till tells a more complicated truth — one shaped by food prices, municipal bills, and the quiet creep of services you cannot opt out of. Inflation may not be shouting anymore, but it is still speaking. The question is whether we are listening closely enough when the total appears on the screen.
Compiled by Ms Z Janz and Prof DH Tustin
26 January 2026