The increase in South Africa’s consumer price index (CPI), which is used by the South African Reserve Bank for its inflation target, was up 8,5% year-on-year (y/y) in March from 8,6% y/y in February, Statistics South Africa said on Wednesday.
This comes after the declining trend was broken in February and will thus provide some solace for the markets.
Previously there had been a five-monthly decline after the record 13,6% registered for CPIX (consumer inflation less mortgage costs) — the old targeted measure — in August last year and the 13,7% for the old CPI in August.
CPI was up 1,3% month-on-month after increasing 1,2% in February.
Consumer inflation was expected to have receded to an 8,4% increase, according to a survey of leading economists by I-Net Bridge.
Forecasts among the leading economists surveyed for CPI ranged from 7,9% to 9,1%. CPI was at 8,9% a year ago.
Chris Hart, an economist at Investment Solutions, reacted to the data by saying: “It’s slightly higher than the consensus. Inflation might be proving to be a bit sticky, but we still believe it is in a downward trend, so there is still scope to lower interest rates.
“We would like to see the next figure easing quite a bit from this.”
An economist at Investec Group Economics, Annabel Bishop, said: “CPI is marginally higher than expected. However, we continue to expect a 100 basis point (bp) cut in interest rates at this week’s Monetary Policy Committee meeting where the focus is likely to have shifted from inflation to the potential deepening and lengthening of the South African recession.
“Indications are that the South African economy could remain in recession this year. Should this scenario become more likely as economic data is released which supports it — such as yesterday’s liquidation statistics and January’s leading indicator — this week’s 100bp interest rate cut is unlikely to be the last substantial one in the current interest rate cycle as there is now the growing possibility of a 100bp cut in interest rates in June rather than the currently expected 50bp easing. — I-Net Bridge