CPIX figure a 'shocker'

South Africa’s targeted CPIX inflation rate quickened to 7,3% in the year to October from 6,7% in September, data showed on Wednesday, above forecasts.

Statistics South Africa also said that the all-items consumer price index (CPI) increased by an annual rate of 7,9%, compared with 7,2% in September.

On a monthly basis, CPIX rose by 0,7% in October compared to 0,7% growth previously, and headline CPI increased by 0,9% month-on-month.

A Reuters poll had forecast CPIX would tick up to 7% year-on-year and predicted a rise of 0,4% month-on-month.

Ridle Markus, an economist at Absa said the figure was a lot worse than expected. “We expected 7% for CPIX and this is not a good sign for interest rates in December.
I do think that interest rates will be hiked on the back of these surprising numbers.

“This will put further pressure on interest rates, with peak inflation now likely to be well above 8% in February 2008, although, I think the Reserve Bank would not want to kill the economy in 2008.”

Nico Kelder, an economist at Efficient Group said the figure was a “shocker”.

“A rate hike in December has been a given. These figures, as well as yesterday’s [Tuesday’s] data that the economy grew above 4,5%, and expected petrol price hikes in next month and in January, mean that another rate hike is a strong possibility at the MPC meeting in January next year.”

Colen Garrow, an economist at Brait, said: “CPIX is higher than the market was discounting. It’s an indication that inflation is rising for all the wrong reasons and it suggests that a rate hike is on the cards.

“CPI is also still very high. The figures are trending higher. The numbers confirm what markets have discounted. People must be vigilant; we are likely to see prime hit 14,5% next month. This prospect is damaging for economic growth.” - Reuters, I-Net Bridge

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