Household spending has been a key driver of the recovery, growing by about 2.5% in real terms in 2021 on the back of rising disposable income. With rising inflation, however, consumption by households is likely to come under increasing pressure. Inflation breached the upper limit of the target range in May, accelerating to 6.5%.
Early impetus came from food and fuel, but inflation pressures have since broadened. Goods inflation has risen sharply over the past few months, reflecting high global inflation, rising production and distribution costs, and a weaker rand exchange rate. Services price inflation still remains moderate, but has about doubled in recent months and poses a risk to the inflation outlook.