CPIX data ‘much higher than expected’

The increase in South Africa’s CPIX (consumer inflation less mortgage costs) for metro and other areas, which is used by the South African Reserve Bank for its inflation target, was up 6,7% year-on-year (y/y) in September from 6,3% y/y in August, Statistics South Africa (Stats SA) said on Wednesday.

CPIX was up 0,7% month-on-month (m/m) after it increased 0,3% m/m in August.

Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 7,2% y/y in September from a 6,7% y/y increase in August.

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

Stats SA said the annual increase of 6,7% in the CPIX for the historical metropolitan and other urban areas was mainly due to relatively large annual contributions in the price indices for food (+3,2 percentage points), housing (0,8), medical care and health expenses (0,5), household operations (0,4), transport (0,4), education (0,4), fuel and power (0,3) and personal care (0,3).

Mike Schussler, economist at T-Sec, said of the CPIX figures: “It’s a shocker. This seals our fate for another interest-rate hike, and the chances of yet another after that is looming. The bond market will take a hit and the stock market will certainly be influenced by these figures.

“While this is not the first shock we have had this year, we are now looking at a much higher inflation rate than before. We are now looking at inflation of 7.5% by early next year.”

Anneari de Waal, economist at Nedbank, said: “It is much higher than expected. I would suspect food prices and domestic wages increased higher than expected.

“Looking forward, we still believe that CPIX will remain above the 6% target and given the Reserve Bank’s comments that it is determined to bring CPIX to within the target range, the numbers pose an interest-rate hike risk. But we still maintain our view that interest rates would remain on hold during the next meeting.”

Chris Hart, economist at Investment Solutions, said: “It came out higher than expectations, which is negative for bonds. I think that food is still a driver, but we have to bear in mind that this is in line with the forecasted CPI peak of 7% in the first quarter next year. — I-Net Bridge

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