Consumer inflation seen accelerating

The consumer price index excluding interest rates on mortgage bonds (CPIX) should accelerate in year-on-year terms to 13,3% in August from 13% in July, RMB financial markets research said on Monday.

RMB forecast a month-on-month increase of 0,5% in August CPIX.

“The upward pressure on the index will probably come from higher processed food prices and residual increases in electricity tariffs and housing costs,” RMB said.

Statistics South Africa is expected to release the CPIX data on Tuesday at 11.30am.

Electricity tariffs rose 23% month-on-month in July—a jump that represented most of the 36,2% adjustment in tariffs recommended to municipalities by the National Energy Regulator of South Africa.

However, many municipalities, including Johannesburg, were unable to make the full adjustment in July and the remainder of the increase was likely to be staggered from August to October.

“With this in mind, we forecast a further 4,5% month-on-month increase in electricity tariffs in August.

“We also expect a residual 2% month-on-month rise in rates and assessment taxes after Stats SA noted that certain municipal areas would only implement increases in August instead of July.”

Food prices had contributed substantially to CPIX inflation in recent months, and would probably rise by a further 1,1% month-on-month in August.

However, signs of moderation in food inflation should be seen at the consumer level, RMB said, as the agricultural producer price inflation had already fallen sharply and transports costs were moderating.

The upward pressure on the index from food, electricity and housing costs would be partially offset by a 27-cents-per-litre cut in the petrol price during the month.

The rapid decline in the price of Brent crude oil, which had dropped by 33% (from a high of $145 in early July to $97) paved the way for further petrol price relief despite the recent bout of rand weakness.

“We have already seen a 74c/l cut in September and forecast further cuts of 30c/l and 10 c/l in October and November.

“With petrol set to subtract from increases in CPIX in the months ahead, August will in all likelihood mark the peak of a lengthy three-year inflation up-cycle.”—Sapa

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