Coffee Table Economics (CTE) with Anchor, written by Casey Sprake, is published periodically and offers a thoughtful mix of research, analysis, and commentary. Covering everything from inflation and central bank dynamics to global market moves and socio-political events, CTE distils the forces shaping the economy into insights that are both accessible and easy to digest – making sense of the complex so you do not have to.
Executive summary
In this week’s edition, we highlight the following:
- Tariffs, sanctions, and the shadow fleet: The high stakes of Russia’s oil trade. Even after sweeping sanctions, Russia has pocketed nearly US$1trn from fossil fuel exports since 2022, with China, India, and Turkey stepping in as Europe steps back. However, as the US ramps up tariff pressure and Europe’s liquefied natural gas (LNG) imports quietly climb, the global economy faces a thorny question: can the world really afford to break its dependence on Russian energy?
- SA 2Q25 GDP: One step forward, two steps uncertain. SA’s economy found some footing in 2Q25, with gross domestic product (GDP) rebounding by 0.8% QoQ on the back of stronger mining, manufacturing, and consumer spending. The result beat market forecasts, hinting at more resilience than expected. However, with US tariffs only kicking in after June and private investment still shrinking, the recovery looks fragile- and the real test lies ahead.
- Mind the gap: The long road to anchoring inflation expectations. SA’s inflation expectations have fallen to their lowest levels on record, offering the South African Reserve Bank (SARB) some much-needed credibility and breathing room. Analysts, trade unions, and businesses are steadily shifting their forecasts down- but households remain stubbornly unconvinced. With expectations still above the Bank’s new 3% anchor, this gap highlights the persistent challenge of fully entrenching lower inflation dynamics in SA and underscores why the SARB will need to remain vigilant and patient in its efforts to align expectations with its long-term objective
Tariffs, sanctions, and the shadow fleet: The high stakes of Russia’s oil trade
Since the Russian invasion of Ukraine on 24 February 2022, Russia has earned an estimated US$915bn from fossil fuel exports, underscoring how central oil and gas revenues remain to its economy and war effort. Despite sweeping sanctions, fossil fuel trade flows have been resilient, with major importers shifting over time rather than disappearing altogether. At the outset, Europe was Russia’s most lucrative customer, accounting for over US$223bn in fossil fuel purchases in the first two years of the conflict. But by June 2022, China had overtaken the EU as the largest importer of Russian oil and gas, and by 2025 its imports were nearly six times larger than those of Europe. India and Turkey have also emerged as major buyers, capitalising on steep discounts offered by Moscow to keep its energy flowing. India, in particular, has refined Russian crude into products that are then re-exported to global markets. In contrast, the US and the UK, whose imports were already modest before the invasion, have cut purchases to zero.
This reordering of global energy flows has carried broader economic consequences. Longer shipping routes and reliance on a growing “shadow fleet” of older tankers have raised transport costs. At the same time, the price gap between discounted Russian crude and standard global benchmarks has introduced a two-tiered pricing system. The result has been both market distortion and growing fragmentation in global energy trade. Europe’s own relationship with Russian energy illustrates these tensions. Despite political commitments to sever ties, the continent remains entangled. In 2024, European purchases of Russian gas still amounted to EUR21.9bn (US$23.6bn), according to Ember, an energy think tank. In the opening weeks of 2025, the EU imported a record 837,300 metric tonnes of Russian LNG, highlighting how liquefied gas has become a quiet backdoor for Russian revenues. While Europe has diversified away from pipeline dependence, these LNG flows suggest that its energy security (and credibility on sanctions) remains vulnerable. The risk is not only political but also economic – any disruption to LNG supply or escalation in sanctions could trigger renewed energy price spikes for European households and industries.
The US, meanwhile, has responded with renewed pressure. Washington is advancing tariff mechanisms aimed not only at Russia but at the countries that continue to buy its oil and gas. This builds on the G7 price cap, which has struggled to constrain Russia’s revenues amid creative shipping arrangements and opaque trading hubs. Tariffs represent a more aggressive tool and carry their own global implications. For Europe, tighter scrutiny could complicate LNG procurement and push costs higher. For Asia, particularly China and India, US measures heighten the risk of secondary trade frictions, adding another layer of strain to already tense geopolitical and economic relations. As for emerging markets (EMs) dependent on imported fuel, tariff-driven disruptions could amplify volatility and feed through into inflation.
Despite the web of sanctions and tariffs, Russia remains a dominant force in global oil markets. Frequently competing with Saudi Arabia for the second spot behind the US, its major producers (state-backed Gazprom, Rosneft, and the largest privately owned oil company in Russia, Lukoil) continue to anchor production. This reality underscores the central paradox of today’s global economy: even as much of the world seeks to isolate Russia, it cannot yet escape dependence on Russian energy to stabilise supply and pricing.
The global economic implications are far-reaching. Inflationary pressures remain a constant risk as shipping costs climb and energy prices fragment across regions. Trade patterns have fractured into competing blocs, with Western nations shunning Russian supplies while Asian economies embrace them. Energy security has become more fragile, with markets highly exposed to shocks from sanctions, tanker shortages, or geopolitical flare-ups. For Russia, energy exports remain the lifeblood of fiscal stability and its war machine. At the same time, for importers, higher costs and volatile supply chains risk straining public finances and fuelling social pressures.
The bottom line
Ultimately, the question is whether tariff-led strategies can succeed where sanctions have struggled, reducing Moscow’s fossil fuel revenues without unleashing new inflationary waves across the global economy. For Europe, the challenge lies in accelerating diversification while keeping the lights on at home. For the US, it is about testing whether tariff diplomacy can shift the balance without deepening economic fragmentation. For the rest of the world, the stakes are clear: in an already fragile global economy, Russia’s energy role remains a powerful source of both dependency and disruption.
SA 2Q25 GDP: One step forward, two steps uncertain
After just managing to stay afloat with growth of only 0.1% QoQ in 1Q25, SA’s real GDP showed a more convincing rebound in 2Q25, expanding by 0.8% QoQ between April and June. On the supply side, manufacturing, mining, and trade each chipped in 0.2 ppts to the overall figure, while stronger household spending and softer imports lifted the demand side. Encouragingly, this result beat even the more upbeat market forecasts, showing that both demand and supply held up better than many had expected. However, it is important to keep in mind that this latest data release reflects activity before the implementation of the Trump administration’s 30% tariff hikes on SA imports to the US, which came into force on 7 August. That timing matters: while 2Q25 showed an economy finding its feet, the real bite of higher trade barriers (especially in autos and related industries) is likely to show up in later GDP prints.
On the production front, 2Q25 brought a welcome turnaround in key industries. Manufacturing grew by 1.8%, with autos leading the charge alongside petroleum, chemicals, rubber, and plastics. Mining did even better, up 3.7% (its strongest showing since early 2021), thanks to platinum group metals (PGMs), gold, and chromium ore. Together, these gains suggest SA’s industrial engines still have some fuel left in the tank. Consumer-facing sectors also added to the positive tone. Trade, catering, and accommodation jumped 1.7% QoQ, their best performance in more than three years, with retail, motor trade, and hospitality all seeing gains. Households clearly kept spending despite cost-of-living pressures. Wholesale trade, however, slipped, hinting at some supply-chain or business-demand issues. Agriculture continued to punch above its weight, growing 2.5% after an eye-popping 18.6% surge in 1Q25. At the same time, not quite as spectacular, horticulture and animal products drove 2Q25 gains, even as disease outbreaks and delayed harvests tempered momentum. Interestingly, some of that delayed output could spill into 3Q25, offering a potential upside surprise. Not every sector shared in the good news, however. Construction fell for the third straight quarter, weighed down by weak building activity – a reminder of just how much the sector mirrors broader investment confidence. Transport and logistics also disappointed, underscoring the persistent drag from SA’s infrastructure bottlenecks.
Looking at the demand side, household consumption rose for a fifth quarter in a row, up 0.8%. Spending was strongest on insurance, restaurants, clothing, and footwear, though households cut back on alcohol, tobacco, and utilities. This mix suggests families are juggling priorities – tightening belts in some areas while protecting or even indulging in others. Meanwhile, inventories finally rose after five quarters of rundown, though whether that reflects firms gearing up for demand or just stockpiling faster than sales can absorb remains to be seen. Trade flows were weaker. Imports dropped 2.1% QoQ, particularly in machinery and equipment- not a great sign for investment appetite. Exports also fell, hit by lower shipments of metals, vegetables, and vehicles. Gross fixed capital formation (GFCF) stayed in the red, with private investment falling another 1.4%. For an economy badly in need of long-term momentum, that lack of investment is the biggest red flag.
The bottom line
Taken together, 2Q25’s stronger GDP print is a welcome relief but not a game-changer. Households are still propping up growth, while business confidence and exports remain shaky. With tariff impacts set to filter through in the coming quarters, the recovery remains fragile. For South Africans on the ground, the story is sobering: jobs remain scarce, wages are under pressure, and rising costs continue to bite. The SARB has cut its 2025 growth forecast to 0.9%, with the IMF seeing a similar 1% growth, not enough to shift the needle on unemployment or living standards. Without a real pickup in investment and reforms, the risk is that even when the economy surprises on the upside, it still feels like it is just muddling along.
Mind the gap: The long road to anchoring inflation expectations
Back in 2001, the SARB asked the Bureau for Economic Research (BER) to start running a quarterly survey on inflation expectations. The idea was simple: ask the groups that matter most – analysts, business people, trade unions, and households- what they think about inflation. Each of these groups has a different way of shaping the economy. Businesses influence prices directly, analysts steer sentiment in financial markets, and workers (via trade unions and households) drive wage negotiations, which can feed straight into inflation. For the SARB’s Monetary Policy Committee (MPC), the survey is a valuable compass. If expectations start rising too far above the 3%–6% target range, alarm bells ring. Higher expected inflation can quickly turn into higher wage demands and bigger price hikes. To keep those risks in check, the Bank might have to raise rates. On the flip side, when expectations ease, the MPC has more room to hold steady or even cut.
The latest survey, covering 3Q25, brought some welcome news. On average, analysts, trade unions, and business people now see headline inflation averaging 4.2% over the next five years – the lowest since the survey began in 2011. Expectations for 2027 were also nudged down to 4.2%, a two-decade low. Analysts are the most optimistic, pegging five-year inflation at 3.6%. Trade unions are a bit higher at 4.3%, while business people are sticking to their guns with 4.5%. These shifts came just after the SARB announced in July that it now prefers inflation closer to 3% – down from its informal 4.5% midpoint. That said, expectations had already been on a downward drift since early 2024. Near-term forecasts were also adjusted slightly lower. Across the three social groups, 2025 inflation is now expected at 3.8%, and 2026 at 4.2%. Analysts are again the most upbeat at 3.9% for 2025, compared to 4.5% from business people and 4.3% from trade unions. Households, however, remain unconvinced. Their one-year inflation expectations are stuck at 5.5%, unchanged from the previous quarter and similar across income groups. This shows how sticky perceptions can be for ordinary consumers, even as professional forecasters and businesses shift their views downward. Lower inflation expectations have also cooled wage forecasts. Respondents now expect salaries to rise by 4.7% this year and 4.8% next year, a touch softer than the previous 4.9% and 5.1%. Growth expectations, meanwhile, remain weak. On average, respondents see GDP growing by just 0.8% in 2025 and 1.2% in 2026 – barely enough to move the needle.
The bottom line
All in all, the continued downtrend in inflation expectations is encouraging and reinforces the credibility of the SARB’s policy stance. It suggests that monetary policy is gaining traction in shaping public perceptions. That said, the task is far from complete. Crucially, while expectations have eased to historic lows, they still sit well above the SARB’s preferred 3% anchor. This gap highlights the persistent challenge of fully entrenching lower inflation dynamics in SA. It also underscores why the Bank will need to remain vigilant and patient in its efforts to align expectations with its long-term objective
