July CPIX quickens to record 13%

South Africa’s targeted CPIX inflation jumped to a new record 13% year-on-year in July from 11,6% in June, Statistics South Africa said on Wednesday.

The all-items consumer price index (CPI) increased by an annual rate of 13,4%, compared to a previous 12,2%, Stats SA said.

On a monthly basis, CPIX was at 2,5% in July while headline CPI increased by 2,1% month-on-month.

A Reuters poll forecast CPIX would jump to 12,9% year-on-year and quicken to 2,3% month-on-month.

‘A bit of a shocker’
Christo Luus, chief economist at Absa, said: “A bit of a shocker, but not entirely unexpected. We did anticipate that we would see inflation peaking in September or October. Thereafter there should be some respite and pull back in inflation.
We may see worse figures.

“I expect CPIX will hit 14% before there is a turnaround. This is the consequence of exceedingly high oil and food prices—although food prices are believed to have peaked. By October or November the worst should be over.”

George Glynos, market analyst at ETM, said the figure was broadly in line with his expectations.

“It reflects very strong growth obviously. I think that this could be the peak in inflation, depending on the kind of petrol price cut that we see for the September figure.”

Annabel Bishop, economist at Investec, said the record figure was chiefly driven by food, petrol and electricity prices.

“A potential cut of R1/litre is being scheduled for September, which will provide a lot of relief to the inflation outcome in that month.

“Next year’s re-weighting exercise will result in a lower level of consumer inflation. In addition, the mortgage interest rate component of CPI will be done away with, replaced by the income which can be charged for renting homes instead of living in them. By definition, CPIX inflation would potentially fall away. Whether CPIX inflation would be replaced by CPI inflation as the targeted measure is uncertain but the new measure to be targeted is likely to be announced at November’s MTBPS [Medium Term Budget Policy Statement].

“We expect no more interest rate moves this year. The sharp drop in the level of inflation in 2009 is likely to cause the SARB to cut interest rates significantly, beginning with a 50bp easing at the April MPC meeting.” - I-Net Bridge, Reuters

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