South Africa’s CPIX inflation (headline inflation excluding mortgage costs) was up 4,8% year-on-year (y/y) for metro and other areas in February compared with 4,2% in January and 4% in December, Statistics South Africa (Stats SA) said on Wednesday. CPIX was up 0,5% month-on-month (m/m) compared with a 1,1% m/m increase in January.
Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 0,7% y/y from a 0,2% y/y increase in January.
The February core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, rose 5,3% y/y from 4,7% y/y in January.
The CPIX, which is used by the South African Reserve Bank for its inflation target, was expected to rise to 4,8% y/y.
The February CPI was expected to rise to 0,7% y/y, according to an I-Net Bridge survey. The range of CPI forecasts was from 0,3% y/y to 0,9% y/y.
The following are economists’ reactions to the data:
Annabel Bishop, economist at Investec: “Upward pressure on food and petrol prices and a low base effect are likely to have pushed February’s CPIX inflation reading above that of January’s. Investec forecasts that CPIX inflation will continue to rise over most of 2004, coming out close to 6% at year end. Investec believes that interest rates will remain on hold until December this year when a 50 basis-point hike will occur.”
Mike Schussler, economist at Tradek: “It is pretty much on the higher end of expectations, but it is what we expected. I think it will be a bit negative for the bond market. I think it has a lot to do with the way we measure the domestic component of CPIX, which is wrong. Hopefully this will be rectified in the next few months.”
Monica Ambrosi, economist at Standard Bank: “The figures are pretty much in line with expectations, and there are no surprises given what the consensus is. So these figures are welcomed. As for the path of inflation, this confirms our expectations. So overall my general view is that it’s no surprise even though it’s slightly higher there’s nothing to worry about.”
George Glynos, market analyst at Econometrix Treasury Management: “The data was largely in line with market expectations. It is encouraging to see that the food component didn’t contribute at all to month-on-month growth. Food price pressures haven’t filtered through yet and although this is going to come, it is good to see they haven’t impacted yet in February.”
Chris Hart, senior treasury economist at Absa: “CPIX definitely bottomed in December and seems to be in a cyclical upward trend with higher food and oil prices taking effect. The recent rally in food prices seems to have abated, but the oil price has continued to climb after February. We are still looking for a 100 basis point cut in interest rates in the fourth quarter of 2004. However, the rand is the key swing factor and if it continues to strengthen, then the interest rate cut in the fourth quarter won’t take place.”
Johan Rossouw, economist at Vector Securities: “The February CPIX and headline CPI data were in line with expectations, so there shouldn’t be much impact on the bond market. The big issue is that both were up versus January, which confirms that the inflation cycle is on its way up, and vidicates the previous decision by the monetary policy committee to leave interest rates unchanged. The next move in interest rates will therefore be up in the latter part of this year. It is the final blow to any remaining optimists for further interest rate cuts.” — I-Net Bridge