South Africa’s headline annual consumer price inflation accelerated for the third consecutive month in May, reaching a 5-month high of 4.6%, up from 4.5% in April, data from Statistics South Africa showed. Analysts had projected May's inflation to steady at 4.5%, according to the median consensus forecast from a Business Day survey of six economists.

Compared to the previous month, consumer prices rose 0.3% in May, slowing from a 0.9% increase in April.

The annual core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy edged up to 5.7% last month from 5.6% in April. The monthly core inflation eased to 0.2% from 0.3%.

The sub-groups that contributed most to the headline annual inflation last month were housing and utilities (1.3pp, the same as in April), miscellaneous goods and services (1.1pp, the same as in April), and food and non-alcoholic beverages (0.7pp, down from 0.8pp in April).

The negative contribution of the transport subgroup decreased to -0.1pp last month from -0.2pp in April, as prices fell 0.7% y/y after a 1.1% y/y drop in April. Within that group, petrol prices declined 9.8% y/y, softening from a 10.8% y/y drop in April.

According to the central bank’s latest forecast from May, the average headline inflation should decelerate from 6.1% in 2014 to 4.9% in 2015, before bouncing back to 6.1% in 2016. Core inflation is anticipated to average 5.6% this year, easing to 5.4% in 2016. The South African Reserve Bank (SARB) warned that the upside risks to the inflation outlook have increased, mainly due to further possible electricity price increases, a potential further weakening of the rand in reaction to US monetary policy tightening, and the possibility of a wage-price spiral, should settlements well in excess of inflation become an economy-wide norm.