South Africa’s targeted consumer inflation quickened slightly to 3,4% year-on-year in October from 3,2% in September, official data showed on Wednesday.
Statistics South Africa said headline consumer price index (CPI) was at 0,2% month-on-month compared with 0,1% in September.
A Reuters poll showed economists expected inflation to tick up to 3,3% year-on-year and be steady at 0,1% month-on-month.
Absa Capital economist Gina Schoeman told I-Net Bridge on Wednesday that the figure was similar to their forecast. “What is particularly important is that this is the first time since July 2009 that CPI has surprised to the upside, but also important is that today’s number puts the Reserve Bank’s forecast of 4,3% for inflation for 2010 very likely.”
Economics.co.za economist Mike Schussler said, “I think we have now found our lowest point of inflation and we also have now probably found the lowest interest rates. Inflation is moving up — a point lower than 3,2% — which inflation was in September — is unlikely.”
Efficient Group economist Freddie Mitchell agreed that the figure increased but was still quite low. “I think it should stay within the target band for the rest of the year.”
Investment Solutions economist Chris Hart said the CPI was above his expectation. “However, at these levels, the CPI is still in the benign area. It wouldn’t necessarily sway the Reserve Bank’s stance to lower rates in the foreseeable future, provided the rand continues to strengthen from the current levels.”
Investec Group economist Annabel Bishop said, “Inflation came out marginally higher than expected in October, which was a low survey month. A rise in new vehicle prices accounted for the unexpected outcome. Base effects are likely to cause inflation to rise over 2011, and in the last two months of 2010, with CPI inflation averaging 4.0% in 2011, but approaching 5.0% in December 2011.
“With inflation still well below the mid point of the inflation target range and job losses ongoing, there is scope for another interest rate cut. However, its materialisation will depend heavily on the strength of the economy.”
Brait economist Colen Garrow said the CPI came as a bit of a surprise. “I think the data indicates that inflationary pressures in the economy are generally subdued, in line with the rest of the global economy. We are therefore likely to see lower interest rates in the near term.” — Reuters, I-Net Bridge