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 4,5% year-on-year (y/y) in February after increasing by 4,3% y/y in January, Statistics South Africa (Stats SA) said on Wednesday.
CPIX was up 0,2% month-on-month (m/m) in February after it increased by 0,7% m/m in January.
Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 3,9% y/y in February from a 4% y/y increase in January.
The core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, was up 4,1% y/y in February, unchanged from January.
The CPIX, which is used by the South African Reserve Bank (SARB) for its inflation target, was expected to have risen to 4,6% y/y, according to a survey of economists conducted by I-Net Bridge. Economists’ forecasts ranged from 4,4% y/y to 4,9% y/y.
The February headline CPI for all items was expected to have risen to 4,1% y/y, with the range of forecasts from 4,0% y/y to 4,4% y/y.
The SARB inflation target range is from 3% to 6% y/y and 23 out of the past 28 releases were below the mid-point of the SARB’s target range.
The lower annual consumer inflation rate in February compared with January can be explained by a decrease in the annual rate of change for the CPI for household operation to 3,1% y/y from 5,8% y/y, Stats SA said.
The annual increase of 3,9% y/y in the CPI was mainly due to relatively large annual contributions in the price indices for transport (+1,3 percentage points), food (+1,1 percentage points), medical care and health expenses (+0,5 of a percentage point), education (+0,3 of a percentage point), housing (+0,2 of a percentage point) and household operation (+0,2 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).
Reacting to the data, Annabel Bishop, an economist at Investec, said: “Food prices continued to rise due to adverse weather conditions and there was a petrol price hike. March’s 11c/litre cut in the petrol price will not be enough to cancel out the combined 18c/litre hike in January and February nor the expected 24c/litre increase in April.
“We continue to believe interest rates will remain unchanged in 2006, with the risk to this forecast being a 25bp to 50bp cut.”
Magan Mistry, an economist at Nedbank said: “February CPIX was slightly lower than what was expected. Inflation remains surprising subdued despite the higher oil price, with the strong rand having helped. March CPIX is likely to come in at 4,2%. We are forecasting stable interest rates in both 2006 and 2007.”
Mike Schusller, an economist at T-Sec, said he thought the number “was very good indeed”.
“I think it will be good for bonds. February is likely to be the high point for inflation for South Africa for this year and the chances are very good for a rate cut going forward.”
Shireen Darmalingam, an economist at Standard Bank said the figures had come in slightly lower than their expectations.
“In the short to medium term inflation should remain benign. This set of figures supports our view that the interest rates should be left unchanged.” – I-Net Bridge