March inflation at nine-month high on food prices

South Africa’s headline consumer inflation accelerated more than expected to a nine-month high in March, mainly driven by higher food prices.

Statistics South Africa said on Wednesday consumer inflation quickened to 4,1% year-on-year in March from 3,7% in February.

Economists in a Reuters poll expected 3,9%.

On a month-on-month basis, inflation went up to 1,2% from 0,7%, also above market expectations of 0,1%.

The main driver was food inflation, which quickened to 5% year-on-year, and was up 1,2% month-on-month from -0,1% in February.

The South African Reserve Bank (SARB) expects inflation to remain within its targeted band of between 3% and 6% until the end of 2012, but says food and fuel prices are the main upside risks to the inflation outlook.

“This print will serve to jolt the market. CPI [consumer price index] is rising rapidly, notwithstanding South Africa’s generally weak economic recovery,” said Razia Khan, head of Africa research at Standard Chartered in London.

“The SARB will not overreact, of course, but this print will set the market thinking about how soon we might need to see tightening in South Africa,” she added.

The bank left the repo rate unchanged at 5,5% in March, for the second time this year, after reducing it by 650 basis points between December 2008 and December 2010.

The Reserve Bank’s Deputy Governor, Daniel Mminele, said this week the bank will base policy action on an assessment of second-round effects of higher oil and food prices on inflation.—Reuters


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