The gap between the numbers and our wallets

When we hear that inflation is coming down, we understandably expect some relief. Yet the grocery bill remains painful, filling the car costs a fortune, and our salaries never seem to stretch far enough.

So where is the good news?

The answer lies in the difference between prices coming down and prices rising more slowly. Economists call the latter disinflation. For households, that distinction makes all the difference.

Petrol: the increase disappears, but the cost remains

Imagine petrol increases from R25 to R30 a litre. That is a 20% increase. Filling a 50-litre tank now costs R1,500 instead of R1,250: an extra R250 every time.

Now suppose petrol stays at R30 for the next twelve months. Once we compare R30 with R30 a year earlier, annual petrol inflation is zero.

But that extra R250 has not disappeared from your budget.

This is how inflation can improve on paper while families remain under considerable financial pressure. The increase eventually falls out of the annual comparison. The higher cost stays.

How fuel costs spread through the economy

And petrol is only part of the story.

Higher fuel costs work their way through deliveries, farming, manufacturing and public transport. Some businesses absorb these costs initially. Others pass them on when they next review prices or renew contracts. The effects can therefore emerge gradually.

Wage negotiations: the next round of pressure

Then comes the next conversation: wages.

An employee sitting across the table from an employer is unlikely to feel reassured by a lower inflation forecast. Their concern is what their salary can actually buy.

If food, transport and electricity have already become substantially more expensive, they may seek an increase that helps recover lost purchasing power.

That demand is understandable. But the employer may also face higher operating costs and weaker sales. If higher wages are then passed into selling prices, another round of increases can follow.

This is the second-round inflation risk: the original shock begins influencing wage settlements, expectations and future pricing decisions. It is a possibility, rather than an inevitable wage-price spiral.

Squeezed households also spend less

There is also a competing force. When households spend more on essentials, they have less for everything else. Restaurants, retailers and other businesses feel the squeeze. That weaker demand can restrain price increases.

We can therefore experience rising essential costs and struggling businesses at the same time.

What this means for rates—and your budget

For interest rates, this calls for patience. One encouraging inflation reading cannot tell us whether these pressures have run their course. We need to see whether wage settlements and broader price increases are settling down too.

For household planning, the message is equally practical: avoid committing tomorrow’s budget to hoped-for interest rate cuts.

Lower inflation is welcome. But it does not restore yesterday’s prices or automatically repair purchasing power.

The question for listeners is simple: is your income catching up with the cost of living, or are you still absorbing the increases that inflation has already left behind?