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 5% year-on-year (y/y) in August after a 4,9% y/y increase in July, Statistics South Africa (Stats SA) said on Wednesday.
CPIX was up 0,5% month-on-month (m/m) in August after it increased by 1,1%
m/m in July.
Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 5,4% y/y in August from a 5% y/y increase in July.
The core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, was up 3,9% y/y in August from an increase of 3,8% in July.
CPIX was expected to have increased slightly to 5% according to an I-Net Bridge survey of 11 economists. Forecasts ranged from 4,7% y/y to 5% y/y — which was expected by seven of the economists polled.
Dawie Roodt, the chief economist at the Efficient Group said the figure was “pretty much” in line with consensus.
“We will still have to wait and see how the rand and the oil price effect inflation going forward. It is difficult to call, but I don’t think we will see 6% [on CPIX] — I think it will turn before we see 6%.
Mike Schussler, an economist at T-Sec said: “The bond market won’t move much — there’s a chance to go a little lower as a result of the lower oil prices. There’ll be no major effect on the rand. It’s a reasonable number and I definitely see an October rate hike of 50 basis points — and then there’ll be a hike in December — or it could be in February.”
Colen Garrow, an economist at Brait, said South Africans could expect rate hikes of 50 basis points in October in December.
“What happens after that will depend on the rand and oil.”
Goolam Ballim, the group economist at Standard Bank, said the number suggested a further acceleration in inflation “in due course”.
“However, the sharp slide in oil quotes could allude to a better and even probability that CPIX will top out below 6%.”
Annabel Bishop, an economist at Investec, said annual CPIX crept up mainly due to price pressures from food, transport and tobacco costs. The CPIX figure was exactly on consensus, and does not indicate the presence of significantly increased inflationary pressure. We continue to forecast a 50bp hike in interest rates at the October MPC meeting.” – I-Net Bridge