JOHANNESBURG, July 28 - South Africa's annual inflation rate dropped to 4.2 percent in June, aided by lower food and transport prices, the national statistics agency said Wednesday.

"The official inflation rate was 4.2 percent at June 2010. This rate was 0.4 of a percentage point lower than the corresponding annual rate of 4.6 percent in May 2010," Statistics South Africa said in a statement.

Inflation has been steadily declining from double-digit highs in 2008.

The agency reported a decline in food and transport costs due to lower petrol prices, while in housing and utilities, prices ticked up slightly.

The figures covers the opening of South Africa's soccer World Cup, which was expected to push up prices.

But the statistics agency said only hotels showed a significant increase in prices while restaurants showed a slight increase and airfares actually dropped.

"June was the month of the World Cup of course, when one would have expected to see much more evidence of opportunistic price increases, however that appears to be largely absent," said Razia Khan, head of Africa research for Standard Chartered Bank.

Although a recession ended last year, there are concerns on the recovery as South Africa lost 61,000 jobs across all industries between the first and second quarters, denting demand.