/ 26 October 2005

CPIX figures ‘a very pleasant surprise’

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, rose by 4,7% year-on-year (y/y) in September after increasing by 4,8% y/y in August, Statistics South Africa (Stats SA) said on Wednesday.

CPIX was up 0,2% month-on-month (m/m) in September after it was up 0,4% m/m

in August.

Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 4,4% y/y in September from a 3,9% y/y increase in August.

The core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, was up 5% y/y in September compared with a 5,1% y/y rise in August.

September CPIX was expected to rise to 5,1% y/y from August’s 4,8% y/y, according to a survey of economists conducted by I-Net Bridge. Economists’ forecasts for CPIX ranged from 4,7% y/y to 5,6% y/y.

The rise in the headline consumer inflation rate was due to increases in the annual rates of change for:

  • The CPI for transport for which the rate increased from 9,4% in August 2005 to 9,6% in September 2005.

  • The CPI for medical care and health expenses for which the rate increased

    from 6,5% in August 2005 to 6,8% in September 2005.

  • The CPI for food for which the rate increased from 2,6% in August 2005 to

    3,4% in September 2005.

  • The CPI for housing for which the rate increased from 0,5% in August 2005

    to 1,8% in September 2005.

However, these increases were partially counteracted by decreases in the annual rates of change for:

  • The CPI for household operation for which the rate decreased from 9,4%

    in August 2005 to 8,8% in September 2005.

  • The CPI for communication for which the rate decreased from 2,3% in

    August 2005 to 0,1% in September 2005.

    The annual increase of 4,4% in the Consumer Price Index for the historical metropolitan areas is mainly due to relatively large annual increases in the price indices for transport (+ 1,4 percentage points), food (+ 0,7 of a percentage point), medical care and health expenses (+ 0,6 of a percentage point), housing (+ 0,4 of a percentage point), household operation (+ 0,4 of a percentage point) and education (+ 0,3 of a percentage point).

    These annual increases were slightly counteracted by an annual decrease in the price index for clothing and footwear (- 0,1 of a percentage point).

    The annual percentage change in the Consumer Price Index excluding interest rates on mortgage bonds (CPIX) for the historical metropolitan and other urban areas was 4,7% in September 2005 and was mainly due to relatively large annual increases in the price indices for transport (+ 1,3 percentage points), food (+ 0,7 of a percentage point), housing, excluding interest rates on mortgage bonds (+ 0,6 of a percentage point), medical care and health expenses (+ 0,6 of a percentage point), household operation (+ 0,4 of a percentage point) and education (+ 0,4 of a percentage point).

    These annual increases were slightly counteracted by an annual decrease in the price index for clothing and footwear (- 0,1 of a percentage point).

    Monica Ambrosi, an economist at Standard Bank said: “The second round inflation

    figures continue not to be reflected and the question is why — how much longer

    will this continue? Otherwise the numbers on the whole are positive and the main driver this time was transport again. But our guard should not be let down.”

    Mike Schussler, an economist at T-SEC said: “The inflation numbers are brilliant. This probably negates an interest rates rise. I don’t think the MPC should hike

    rates. These figures will be good for the bond market, equities and rand. It is

    an all round brilliant outcome.”

    George Glynos, a market analyst at Econometrix Treasury Management said: “A very pleasant surprise. It’s much softer than anticipated and goes against what we’ve been hearing from South African Reserve Bank Governor Tito Mboweni who has adopted a much more hawkish tone of late. There are no second round inflationary effects reflected as yet and, for now, the SARB can justify leaving rates unchanged.” – I-Net Bridge