The increase in South Africa’s consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank (SARB) for its inflation target, eased to 3,8% year-on-year (y/y) in March after increasing by 4,5% y/y in February, Statistics South Africa (Stats SA) said on Tuesday.
CPIX was expected to fall to 3,9% y/y, according to a consensus forecast of economists conducted by I-Net Bridge. Economists’ forecasts for CPIX ranged from 3,6% y/y to 4% y/y.
Dawie Roodt, chief economist at the Efficient Group said the CPIX number was much better than he had expected.
“Inflation is obviously not a problem in South Africa. The recent increase in the oil price and with it the increase in the petrol price could change this situation, but I don’t think there will be an increase in interest rates. In fact, if the oil price comes down, there could be a cut in interest rates.
Ridle Markus, an economist at Absa, also said the figure was good because of the small decline in the fuel price during March. “But there are still risks because of the oil price,” he said.
Annabel Bishop, an economist at Investec said tax increases and a rise in education costs exerted upward pressure on consumer inflation, but these were all overshadowed by the significant base effect and, to a lesser extent, the 11c/litre cut in the petrol price.
“Petrol prices are expected to rise between 35 and 40c/litre in May. The CPIX outcome was slightly lower than expected but we still believe interest rates will remain unchanged in 2006.”
Colen Garrow, an economist at Brait said he thought the base effects had come into play and overshadowed other components.
“My feeling is that it is still not enough for the Reserve Bank to ease interest rates. Base effects will come into play for the next few months, which is positive for targeted inflation. With the main threat coming in higher oil prices, the best we can hope for is that rates remain unchanged.” ‒ I-Net Bridge