South Africa’s targeted consumer inflation slowed to 6,7% year-on-year in July, slightly above expectations, from 6,9% in June, official data showed on Wednesday.
Statistics South Africa said headline CPI stood at 1,1% on a monthly basis in July compared with 0,4% the previous month.
Consumer inflation was expected to have receded to 6,6% y/y in July, according to a survey of leading economists by I-Net Bridge. Forecasts among the economists surveyed ranged from 6,3% to 6,8%.
Mike Schussler, director at Economists.co.za, said while the figure showed that inflation was slowly going down, the problem remained that inflation “remains sticky” and was likely to increase at the end of the year.
“With the current inflation rate, it means that there is no room for a further rate cut.”
Carmen Altenkirch, a senior economist at Nedbank, said the figure helped to confirm their view that inflation would continue to moderate significantly over the coming months.
“Inflation rose at its slowest pace since September 2007, easing to 6,7% from 6,9%. Slowing food inflation, as well as a further annual decline in fuel prices, helped to push inflation lower. Over the month, consumer prices rose quite sharply, due to higher electricity prices, which added roughly half to the monthly increase, as well as higher prices for other administered prices such as water, rates and taxes. Higher petrol prices and possible increases in insurance and funeral costs, could have also put upward pressure on consumer prices.
“Looking ahead, consumer inflation is expected to remain just above 6% until December.
“However, extremely weak domestic demand, which will limit retailer’s pricing power, combined with consistent rand strength could briefly push inflation below 6%. As a result, lower goods inflation should help to offset services inflation, which remains sticky.
“Food inflation is also expected to moderate further during the remainder of the year, as past price increases at the manufacturing and agricultural level have been fully reflected in the current retail price.” – I-Net Bridge