/ 23 June 2010

CPI slows to 4,6% in May

South Africa’s targeted consumer inflation slowed in line with forecasts to 4,6% year-on-year in May from 4,8% in April, official data showed on Wednesday.

Statistics South Africa said headline CPI was steady at 0,2% on a monthly basis in May.

A Reuters poll last week forecast CPI would slow to 4,6% year-on-year, and be at 0,2% on a monthly basis.

Carmen Altenkirch, economist at Nedbank, told I-Net Bridge that the number had come in spot on market expectations.

“Downward pressure on inflation came from lower
food prices as well as a further moderation in goods inflation, particularly durable and semi-durable goods.

“Double-digit administered price inflation remains the main driver of headline inflation. Although we still expect interest rates to remain on hold well into 2011, the MPC may surprise by easing further in July, given the near-term improvement in inflation and inflation expectations, particularly if growth figures start to disappoint.”

Merina Willemse, economist at Efficient Group, said they had been pleasantly surprised by the figures.

“We however expect this downward trend in CPI to be temporary. As administered prices, particularly Eskom electricity tariff prices, as well as double-digit wage increases filter through, we expect inflation to climb to 5,6% by the end of the year.

“We also expect it to breach the high end of the target band sometime before the Reserve Bank predicts. We do not anticipate interest rates changing due to the lower inflation.”

Annabel Bishop, Investec Group Economics, said: “CPI inflation fell even lower in May, to 4,6% y/y, almost at the midpoint, compared to April’s 4,8% y/y. Rand strength remains key in aiding the ongoing moderation in the inflation outcome, but the ongoing weakness in demand is also important, as well as the statistical base effect.”