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April CPIX ‘a little better than expected’

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, was up 3,7% year-on-year in April after a 3,8% increase in March, Statistics South Africa said on Wednesday.

CPIX was up 0,5% month-on-month in April after it increased by 0,4% in March.

Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 3,3% year-on-year in April from a 3,4% increase in March.

The core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, was up 2,8% year-on-year in April from an increase of 2,9% in March.

CPIX was expected to have remained unchanged at 3,8% in April, an I-Net Bridge survey of economists had found. Forecasts ranged from 3,6% to 4,1%.

George Glynos, market analyst at Econometrix Treasury Management, commented: “The figure is a little better than expected; I don’t think it will change the interest-rate outlook, though. But it does show that inflation is under control and that the SARB would be justified in leaving interest rates unchanged.

“There will probably be a slight tick higher in the month ahead because of factors like the petrol price.”

Dawie Roodt, chief economist at the Efficient Group, said: “It is roughly in line with what we expected. What recently happened with the exchange rate of the rand has not yet been reflected in these numbers, so we will have to wait to see what happens in two or three months’ time, but at the moment there is very little inflationary pressure in the economy.

“Purely based on these numbers, a rate increase is not necessary, but with recent developments in financial markets, this could change.”

Said Annabel Bishop, economist at Investec: “The CPIX outcome was in line with expectations. We still believe interest rates will remain unchanged in 2006. The 21c/litre increase in the petrol price contributed 0,2% to the 0,4% month-on-month increase in the CPIX, with the remaining price pressure coming from food and housing. Petrol prices are expected to rise by at least 30c/litre in June.”

According to Magan Mistry, economist at Nedbank, the April CPIX number was “broadly in line with market expectations”.

“CPIX is likely to rise above 4% in the next two months as the sharp increase in the petrol price starts to take effect,” Mistry said. “Inflation is unlikely to bridge the inflation target range this year or in the foreseeable future. The risks of an interest-rate increase are rising, but interest rates are likely to remain on hold for the rest of 2006.” — I-Net Bridge

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