A new lens on inflation, Weekly News Flash

We are seeing many of the old assumptions break down as post-pandemic inflation remains stickier than expected and consumer behaviour evolves, as illustrated in two different opinion pieces that were published this week.

To fully understand the landscape, we need to look back to the pandemic. Massive fiscal stimulus, aggressive interest rate cuts, and supply chain disruptions during COVID-19 set the stage for a surge in inflation as economies reopened. Exacerbated by the Russian invasion of Ukraine and resultant disruption to global supply chains, central banks struggled to quench rising prices between 2022 and 2024, deploying the steepest interest rate tightening cycle in four decades.

While headline inflation figures in most rich countries have finally fallen from their peaks, prices in categories such as housing and food are still climbing. Globally, inflation has settled higher than the pre-COVID-19 norm. In the US, inflation is stubbornly above the Fed’s 2% target, and interest rates have remained at higher levels for longer than anticipated.

The US is not an outlier. A survey by ifo Institute, a German think tank, found that economists expect global inflation to stabilise at a higher level of 4%. The public and markets are still fretting about further cost pressures in markets such as the UK. Even in the Eurozone, where inflation has subsided to 2%, cost-of-living pressures remain.

The landscape remains challenging for consumers and businesses across the world. Some observers argue that the Consumer Price Index (CPI) as a measure of inflation fails to fully capture the impact of rising prices on working families and lower-income households. This is because these consumers spend a bigger portion of their income on essentials than wealthy households, whereas the US CPI basket, for example, contains 80,000 different goods and services.

Gene Ludwig, a former Comptroller of the Currency in the US, proposes a True Living Cost metric that focuses only on essentials – housing, food, health, transportation, childcare, technology, and basic personal goods. This narrower metric is, in his view, a better gauge of consumers’ purchasing power and has risen at a pace that is about one-third higher than the official benchmark.

The example of South Africa is instructive in this regard. Headline inflation in South Africa has narrowed the gap with most rich countries; indeed, the latest reading of 3.3% is lower than the 3.8% recorded in the UK for July and August. The South African Reserve Bank (SARB) is now proposing an inflation target at the bottom end of its official 3 to 6% band.

Yet food inflation is still running at 5.2% and high transport and especially utility costs continue to bite. The spending power of most households has been eroded after years of low economic growth and slow wage increases. The pressure that poor and lower-middle-class families feel is arguably not captured in a CPI number that looks superficially benign.

The reality in many parts of the world is that consumers have seen their spending power degraded by the rising cost of essential goods and services. This is not a trend that will necessarily end soon. Ongoing trade disputes and tariffs, food supply shocks, and rising services costs may keep inflation sticky for some time yet.

Quality consumer staples and FMCG stocks that once held significant pricing power are finding that their margins are getting squeezed as demand falls. Global research from the likes of NielsenIQ shows that consumers in many parts of the world are “trading down” or shifting toward private label, generic, or lower-cost alternatives to save money.

Inflation, for some stocks, is just part of the story. Consumer behaviours are shifting, and some players are struggling to keep up. The increased use of GLP-1 weight-loss drugs and a focus on healthier eating, for example, have affected some food producers. Liquor groups are under pressure with younger consumers choosing to drink less alcohol than before.

By contrast, we have seen some technology companies retain their pricing power in both the consumer and enterprise segments. The likes of Apple, Netflix, and Microsoft have so far managed to preserve their margins and, in some cases, even increase subscription costs at a time when consumers are tightening their belts. They have established de facto oligopolies and benefit from scale, network effects, high switching costs, and ongoing subscription revenues. These business models have, so far, weathered the inflationary climate.

It is partly for these reasons that we have been realigning sectoral exposures in our global house-view funds by reducing exposures to traditional quality managers in favour of broad market indices and the technology sector. Where appropriate, and subject to the constraints of Capital Gains Tax, we will also be revisiting individual clients’ portfolios in instances where they are not invested in our global house-view funds.

“The CPI is not tremendously relevant to the lived experience of middle- and low-income Americans who don’t buy 80,000 goods and services. If we’re going to have a number that is relevant to them, it’s got to be a smaller group of items that matter to their lives.”

– Gene Ludwig, founder of the Ludwig Institute for Shared Economic Prosperity

“While the stock market on an aggregate basis has fared well, led by large tech companies, most sectors have seen disruptions in the realm of geopolitical conflicts and policy uncertainty. In some cases, this has meant businesses that under normal circumstances are highly stable and predictable have faced disruptions that call into question their defensive characteristics.”

– Martin Frandsen, a portfolio manager at Principal Asset Management

Global News

Tariffs are driving roughly a third of price increases this year, according to a CFO survey released on Wednesday by Duke University and the Fed Banks of Richmond and Atlanta. Without US President Donald Trump’s high tariffs, inflation could have been near the Fed’s 2% target instead of the current 2.9%. CFOs also expect tariffs to account for about a quarter of price rises next year. Duke finance professor John Graham said the impact is likely to persist into 2027, contradicting Trump’s claims that his trade policies aren’t fuelling inflation.
Fed Chairman Jerome Powell on Tuesday said that the central bank must balance high inflation with a weakening job market in upcoming rate decisions. He noted that the current 4 to 4.25% rate “leaves us well positioned to respond” and is “not on a preset course”. His comments followed those of Fed Vice Chairman Michelle Bowman, who wants the Fed to cut rates to support the job market. Trump supporter Stephen Miran, in his first policy speech since joining the Fed, said on Monday that interest rates should drop because the neutral rate was lower. On Wednesday, Fed Bank of San Francisco President Mary Daly said further interest-rate cuts are likely needed.
Millions of low-wage Americans may now be “economically invisible,” Bloomberg Opinion columnist Nir Kaissar writes. He explains that the top 10% of earners account for about half of consumer spending, the highest share since at least 1989, according to Moody’s Analytics, which continues to drive the economy. At the bottom end of the scale is his estimate that possibly as many as two-thirds of Americans don’t earn enough to sustain a family of four. His comments come amid a climate in which consumers are almost as pessimistic now as they were during the 2008 financial crisis, contrasted with low unemployment, inflation under control, and a growing economy. “What we do see are troubling signs that low- and middle-income consumers are fading in the economic data,” writes Kaissar.
Yesterday, Trump announced new tariffs, including a 100% duty on branded or patented pharmaceuticals starting from next month unless the company is building a US manufacturing plant. He said on social media that no levies will apply if construction has begun. “Starting October 1st, 2025, we will be imposing a 100% Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America,” Trump wrote. “There will, therefore, be no Tariff on these Pharmaceutical Products if construction has started.” Other products that will attract tariffs include trucks and furniture.
The US has cut tariffs on European car imports to 15%, backdated to 1 August, making official a trade deal announced in July. The change was published by the Department of Commerce and the US Trade Representative on Wednesday. The move eases tensions between the US and Europe and comes as the auto industry was waiting for clarity on the new rules. Shares of Volkswagen, Porsche, and Mercedes-Benz rose on the news, with Porsche, hardest hit by previous US tariffs, jumping as much as 3.8% in Frankfurt.
The US economy expanded at a revised 3.8% annualised rate in the second quarter, the Bureau of Economic Analysis (BEA) said yesterday, up from the previously reported 3.3%. The stronger-than-expected growth follows a contraction in the first quarter and was driven by higher consumer spending. The BEA’s annual update showed real GDP grew at an average 2.4% annual pace from 2019 to 2024, underscoring a quick rebound from the pandemic and a shift to steadier growth despite persistent inflation. The second quarter rebound came after a surge in imports early in the year as companies stocked up ahead of Trump’s tariffs.
US jobless claims dropped 14,000 to a seasonally adjusted 218,000 for the week ended 20 September, the Labor Department said yesterday, below Reuters’ economists’ forecasts of 235,000 to 240,000. Layoffs remain low, but hiring has nearly stalled as tariffs dampen demand for workers and an immigration crackdown tightens labour supply, creating what Powell called a “curious balance”.
US business activity expanded in September at the slowest pace in three months, as weaker demand limited companies’ ability to raise prices despite tariffs. The S&P Global composite output index fell to 53.6, still above the 50-mark for growth, data showed on Tuesday. While input costs rose, prices received dropped to the lowest since April, suggesting squeezed margins but hinting that inflation may moderate, said S&P Global economist Chris Williamson.
US new-home sales jumped in August to the fastest pace since early 2022, rising 20.5% to an annualised rate of 800,000. The unexpected surge, reported by the government on Wednesday, likely reflects builders’ heavy price cuts and sales incentives. The increase is helping to reduce the oversupply of new homes, with available inventory falling to 490,000 units last month, the lowest level this year.
The White House budget office late on Wednesday told federal agencies to prepare for mass layoffs if the government shuts down, targeting programmes not legally required to continue. An Office of Management and Budget memo obtained by CNN directs agencies to identify programmes with funding lapsing after the 30 September deadline and cut jobs deemed “not consistent” with Trump’s priorities. The memo added that the administration hopes Congress will avoid a shutdown, so these steps won’t be needed.
Trump reversed a key foreign policy stance on Tuesday, abandoning his insistence that Ukraine cede land to strike a peace deal with Russia. After meeting President Volodymyr Zelensky in New York, he said Ukraine, with European support, is “in a position to fight and WIN all of Ukraine back in its original form”. The shift was announced via social media and marks a sudden pivot in his approach.
NATO allies are struggling to coordinate a response to Russian airspace violations. On Tuesday, Germany warned against shooting down Russian aircraft, while Trump’s support for a more aggressive stance was backed by Poland and the Baltic states. Polish PM Donald Tusk, the day prior, said there is “no room for discussion” on shooting down threats. The divisions come as Russian President Vladimir Putin tests NATO’s resolve, following recent breaches in Estonia, Poland, and Romania.
Trump addressed the UN General Assembly on Tuesday, criticising world leaders and the body itself. He called for lower global migration and urged nations to reject climate change policies. Trump opposed moves to endorse a Palestinian state amid Israel’s Gaza offensives. Citing the US immigration crackdown as a model, he said: “I’m really good at this stuff. Your countries are going to hell.”
Canada, the UK, and Australia have formally recognised a Palestinian state, joining a growing global consensus despite criticism from Trump. Canada and Australia announced the move on Sunday as a “coordinated international effort” toward a two-state solution, with UK PM Keir Starmer confirming Britain’s support in a video statement. Other countries are also expected to join this movement on the sidelines of UN General Assembly meetings in New York this week. So far, 147 of the UN’s 193 member states have already recognised Palestinian statehood.
China’s export engine is surging despite five months of high US tariffs, pushing the country toward a record $1.2 trillion trade surplus. Exports to India, Africa, and Southeast Asia are at record levels, worrying governments about the impact on domestic industries. Only Mexico has responded publicly, proposing tariffs up to 50% on Chinese goods, while India and Indonesia are monitoring potential dumping. Other nations appear reluctant to risk a trade clash with Beijing, giving China breathing room from US levies that economists predicted would slow growth sharply.
A Google study released on Wednesday found that 90% of tech industry workers use AI for tasks like writing or modifying code, up 14% from last year. The survey of 5,000 professionals highlights AI’s growing role in the workplace amid concerns over its impact on jobs. While some, including Anthropic CEO Dario Amodei, have warned AI could drive unemployment, others in tech argue the effect is more nuanced, though entry-level software engineers are increasingly facing hiring challenges amid widespread layoffs.
OpenAI plans to invest about $400 billion to build five new US data centre sites with Oracle and SoftBank, executives from the three companies said on Tuesday at a press conference in Texas. The facilities, in Texas, New Mexico, and Ohio, will provide 7 gigawatts of power. The expansion moves the companies closer to their $500 billion pledge for US data centres and AI infrastructure over the next four years, supporting services like ChatGPT, now used by 700 million people weekly.
Intel has approached Apple about a potential investment to support the struggling chipmaker, which is now partly owned by the US government, according to sources. The companies have also discussed closer collaboration, though talks are in the early stages and may not result in a deal. Following the news, Intel shares rose 6.4% to $31.22 on Wednesday, while Apple closed slightly lower at $252.31. The discussions come after Nvidia invested $5 billion in Intel last week and SoftBank committed $2 billion last month.
Alibaba shares jumped 9.7% to their highest in nearly four years on Tuesday after CEO Eddie Wu said the company will boost AI spending beyond its original $50 billion-plus plan. Wu expects global AI investment to reach $4 trillion over the next five years, and Alibaba will soon provide an investment plan that builds on what it said in February. The cloud unit will launch its first data centres in Brazil, France, and the Netherlands. The news lifted Chinese chipmakers, with ACM Research (Shanghai) up 15% and Naura Technology Group up 10%.
Pfizer said on Monday it will acquire weight-loss drug developer Metsera in a deal worth up to $7.3 billion, including future payments, to strengthen its position in the fast-growing obesity market projected to hit $150 billion by the early 2030s. The move follows setbacks with Pfizer’s own weight-loss pill danuglipron, which was halted after safety and side-effect concerns. Pfizer’s competitors include Novo Nordisk and Eli Lilly.
As at Thursday’s close the S&P 500 was 0.76% down for the week.

Local News

South Africa’s annual consumer inflation eased to 3.3% in August from 3.5% in July, edging closer to the South African Reserve Bank’s 3% target, while month-to-month prices rose just 0.1%, reflecting a cooling trend led by housing, utilities, food, and non-alcoholic beverages. Yet, as Alex Malapane, CEO of the Market Intelligence Barometer, points out, this lower inflation is less a sign of economic health than of consumers simply being unable to afford to shop. He warns that the headline figures hide deeper problems: growth is forecast at only 1% this year, overall unemployment climbed to 33.2% in the second quarter, and youth joblessness remains critical.
South Africa’s producer price inflation (PPI) for final manufactured goods accelerated to 2.1% in August, up from 1.5% in July, while the monthly PPI rose 0.3%, a sign of mounting inflationary pressures, Statistics South Africa reported yesterday. The biggest contributors to the annual increase were food, beverages, and tobacco, which rose 4.3% year-on-year and accounted for 1.3 percentage points of the headline figure, while monthly gains were driven by those same sectors along with coke, petroleum, chemical, rubber and plastics, metals, machinery, and computing equipment. Statistics South Africa also reported that intermediate goods inflation climbed to 6.5% year-on-year, and the PPI for electricity and water eased slightly to 4.6%, down from 4.9% in July, due to a 1.9% monthly contraction.
Consumer sentiment fell to -13 in the third quarter, from -10 in the second quarter, driven by a sharp drop among middle-class households earning R5,000-R20,000, the FNB/BER Consumer Confidence Index (CCI) released yesterday showed. Sentiment tumbled due to pressure from rising food costs, weak job prospects, and fading one-off pension boosts. In contrast, lower-income households’ confidence improved on above-inflation social grant increases, while high-income households remained steady thanks to lower debt costs, stronger equity markets, and a firm rand.
Retailer confidence fell sharply from 42% to 32% in the third quarter, to the lowest in a year, while wholesale confidence lost 12 percentage points, the Bureau for Economic Research said on Monday. Its survey suggests volume growth in both categories likely moderated during the third quarter of 2025. However, furniture retailers and new vehicle dealers remain bright spots, suggesting higher-income earners are still spending. Retail contributes nearly 20% of GDP and employs about 20% of the workforce.
South Africa is pushing the US to renew the trade-friendly African Growth and Opportunity Act (AGOA) despite steep tariffs, President Cyril Ramaphosa said. Speaking at the Council on Foreign Relations after the UN General Assembly on Wednesday, he said South Africa is also expanding trade with Asia, Latin America, and the Gulf. Ramaphosa called recent US trade actions a “wake-up call” to reduce reliance on a few partners. On Tuesday, the President warned that “trade is now being used as a weapon”.
China is ready to fast-track zero-tariff access for South African goods, Chinese Ambassador Wu Peng said on Tuesday at the South Africa–China Trade and Investment Promotion Conference in Johannesburg. Wu said China is prepared to implement the measures with South Africa quickly, aligning with the country’s 2025–2029 Trade, Investment and Industrialization Plan targeting 100 priority export products.
South Africa signed two Memoranda of Intent with Brazil and Japan towards the end of last week on the sidelines of the G20 Agricultural Working Group in Somerset West, opening doors to new markets, knowledge exchange, and technology. Minister of Agriculture John Steenhuisen said the deals reflect a shared vision for food security and aim to make South African products more competitive. The agreements support trade diversification amid global volatility, with Agbiz CEO Theo Boshoff urging the creation of a trade crisis committee to help the country act proactively.
Yesterday, Taiwan suspended chip export controls on South Africa just two days after imposing them, signalling unease with using tech exports in diplomatic disputes. The Economic Ministry said the decision followed talks with the Foreign Ministry after South Africa requested negotiations over its demand that Taiwan move its de facto embassy. Taipei’s announcement of the curbs was the result of its concerns that there could be threats to national security, which it did not specify. The move drew criticism from China, which warned that the action destabilised global supply chains.
Ramaphosa told journalist Mandy Wiener in an August interview for her new book, released this week, that he is disappointed with how the DA has behaved in South Africa’s Government of National Unity (GNU). Ramaphosa said DA leader John Steenhuisen lacks “magic” in their relationship and accused the party of acting as an opposition while serving in Cabinet, breaking trust by revealing Cabinet discussions. He praised other GNU parties as “disciplined” and committed to defending the coalition.
Helen Zille has been chosen as the DA’s top candidate for Johannesburg mayor, beating at least two rivals, the party said on Sunday. The DA hopes her stature and name recognition will consolidate support ahead of the 2026 local elections. Internal polling shows the metro is “looking very good,” though an outright majority is unlikely. The strategy is to lead a coalition, giving the DA the right to claim the mayoral chain. Zille remains federal council chair while campaigning, with her replacement to be elected at the party’s 2026 elective congress.
Parliament has launched formal scrutiny into Johannesburg’s water crisis after a committee hearing last Friday revealed infrastructure failure, fiscal mismanagement, and constitutional noncompliance. The City and Johannesburg Water presented a R33 billion turnaround plan amid service disruptions. The committee heard Joburg loses up to half its treated water to leaks, illegal connections, and ageing infrastructure. While the utility is technically solvent, municipal treasury controls prevent access to funds, halting key projects and causing contractors to withdraw.
On Tuesday, Transnet CEO Michelle Phillips told Gulf investors at a Durban summit that the entity is a viable investment and has plans to increase private-sector participation. She outlined plans to invest R125 billion over five years. Transnet also said that freight volumes rose year-on-year after falling from a 2017/18 peak, due to customer and labour engagement and an 18-month recovery plan. The operator also wants to cut rail transport costs and prepare for third-party access by inviting private sector players to lease siding facilities and invest in container rail terminals.
On Tuesday, the Competition Tribunal approved the merger between Sanlam Investment Management and Ninety One, subject to transformation and public interest conditions. These include confidentiality protocols, business separation measures, a moratorium on merger-related retrenchments, support for small and HDP (historically disadvantaged persons) – owned asset management firms and stockbrokers, and enterprise and supplier development commitments.
Discovery Bank is preparing for a future in which AI agents can transact and perform banking tasks on behalf of customers, CEO Hylton Kallner told BusinessLIVE last Friday. The technology – agentic AI – will handle payments, queries, financial advice, and even loan approvals. Customers have been introduced to similar services via a WhatsApp chatbot over the past year. Kallner said clients will soon be able to instruct an “agentic banker” to pay accounts, check balances, and retrieve statements.
Pick n Pay CEO Sean Summers said yesterday, at the opening of the retailer’s first hypermarket in Pietermaritzburg, that its turnaround strategy centres on converting underperforming stores, partnering with landlords to right-size locations, and investing in targeted refurbishments. “We’re moving away from scale for its own sake, focusing instead on a smaller, more profitable, higher-quality store base,” he explained, adding that the company is sharpening its product mix, improving services, and boosting customer engagement.
As at the time of writing, the rand was 0.6% weaker against the dollar, and the ALSI was 0.29% down for the week.