South Africa’s CPIX inflation (headline inflation excluding mortgage costs) was up 4,2% year-on-year (y/y) for metro and other areas in July, compared with 5% y/y in June; 4,4% y/y in May, April and March; 4,8% y/y in February; 4,2% y/y in January; and 4% y/y in December, Statistics South Africa (Stats SA) said on Wednesday.
CPIX was up 0,3% month-on-month (m/m) compared with a 0,2% m/m increase in June.
Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 1,6% y/y from a 1,2% y/y increase in June.
The core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, eased to 4,8% y/y in July from 5,7% y/y in June.
The CPIX, which is used by the South African Reserve Bank for its inflation target, was expected to rise by 4,4% y/y.
The CPIX has only been calculated back to January 1997. The range of forecasts for CPIX was from 4% y/y to 4,9% y/y. The Reserve Bank’s inflation target is to keep the y/y rate for CPIX within a range of 3% y/y to 6% y/y.
The last time South Africa experienced y/y deflation at the consumer level was August 1954 when it was -0,3% y/y.
The July headline consumer price index (CPI) for all items was expected to rise marginally to 1,4% y/y from June’s 1,2% y/y increase. The range of CPI forecasts was from 1,1% y/y to 1,7% y/y.
The main contributors to the 4,2% increase in the CPIX were annual increased in housing, excluding interest rates on mortgage bonds; medical care and health expenses; transport; household operation; food; and education.
Stats SA added that the main contributors to the 1,6% y/y increase in CPI were similar to those in June 2004, namely annual increases in transport; medical care and health expenses; household operation; education; and food.
The annual percentage change in food prices for July was 2% compared with 2,7% for June. Stats SA said the 2% increase was due to annual increases in the prices of meat; “other’ food products; milk, cheese and eggs; fruit and nuts; fats and oils; fish and other seafood; and sugar.
Stats SA stated in June that as from July it would publish CPI for administered prices. However, it said on Wednesday that due to technical and definitional problems that have now largely been resolved, it is now expected that these prices will be released on September 29.
Economists react
Annabel Bishop, economist at Investec, said: “A petrol price cut and lower food costs were the chief reasons for the sharp decrease in CPIX inflation in July. We expect interest rates will remain unchanged until H2.05, at which time we believe a 50 basis-point hike will occur.”
Absa economist John Loos said: “The July CPIX figure is better than what I had expected, and I had expected a milder pull back. This figure results in no change to our inflation forecast and we see CPIX moving up to 5,5% by the end of 2004. We see local interest rates remaining flat for the next 18 months up until early 2006.”
Dawie Roodt, chief economist at the Efficient Group, said: “CPIX was in line with expectations. CPI was slightly worse, but this is probably because of the increase in the petrol price.”
Mike Schussler, economist at T-Sec, said: “I think it [CPIX] is a good number. It is lower than our estimates. This is the fourth or fifth month that CPIX has been lower than expectations. It should be good for the bond market and the rand and also possibly for the JSE. It is a good number that points to hardly any inflationary pressure on the economy.”
Dennis Dykes, group economist at Nedcor, commented: “The figures look quite encouraging, it is in line with what we’ve seen over the last few months. I think the food prices and increase in rates and taxes were the key factors this time. Looking ahead, I expect the figures to remain fairly low over the next few months until maybe early next year.” — I-Net Bridge