South Africa’s targeted consumer inflation slowed more than expected to 4,8% year-on-year in April from 5,1% in March, official data showed on Wednesday.
Statistics South Africa said headline CPI stood at 0,2% on a monthly basis in April versus March’s 0,8%.
A Reuters poll last week forecast CPI would slow slightly to to 5% year-on-year, and to 0,4% on a monthly basis.
Carmen Altenkirch, economist at Nedbank, said the Reserve Bank’s most recent inflation forecast had already anticipated a further moderation in inflation, and as a result the figure did not change their view that interest rates were expected to remain unchanged until well into 2011.
“Lower food and goods inflation continued to exert downward pressure on inflation, a trend which will continue over the next few months.
“The rand’s recent weakness poses no immediate concern to the inflation outlook, as the current bout of global risk aversion has also put downward
pressure on commodity prices, including oil. For example, the rand price of Brent crude oil has fallen from R652 in early May to around R550.
“The inflation cycle is forecast to turn in the second half of the year as Eskom’s 25% tariff hike comes into effect, some degree of opportunistic pricing surfaces around the World Cup and as consumer spending picks up further.”
Annabel Bishop, economist at Investec Group, said the strength of the rand was key in aiding the moderate inflation outcome, with still weak demand also an important influence, as well as the statistical base effect.
“CPI inflation is likely to fall to 4,5% as early as the end of the second quarter, supported by rand strength [the trade-weighted rand is 10.5%
stronger on the year], relatively weak demand and easing food price pressures. We continue to expect no further cuts in interest rates this year, the Reserve Bank has a similar inflation forecast to us, but should a major development/s occur to alter its inflation outlook, or new data emerge indicating that the consumer recovery is faltering, then an additional interest rate cut is likely.”
Merina Willemse, an economist at Efficient Group, said they had been pleasantly surprised that CPI had come in lower than their forecast of 5,2%.
“We are not convinced that this is sustainable though as the rand has since depreciated markedly over the past few weeks. We will also have to see tomorrow’s PPI numbers to get a sense of where CPI is going in the future.” – Reuters, I-Net Bridge