South Africa’s key CPIX (consumer inflation less mortgage costs) is unlikely to return to within the 3% to 6% target band before 2010, a senior South African Reserve Bank official said on Monday. The targeted gauge jumped unexpectedly to a near five-and-a-half-year high of 10,4% year-on-year in April.
President Thabo Mbeki has failed to provide leadership and should be recalled from the presidency to make way for early elections, the South African Communist Party (SACP) said on Sunday. The SACP blamed Mbeki for a recent wave of violence against foreigners in which 62 people have been killed.
The National Energy Regulator of South Africa has quietly postponed its final decision on Eskom’s application for a 53% tariff hike to June 18. By Thursday the regulator had not yet posted notice of the change in its decision date on its website, despite the conclusion of this week’s public hearings into the proposed tariff increases.
South Africa has experienced the highest rate of food-price inflation since January 2003, the National Agricultural Marketing Council said in its quarterly food price monitor on Thursday. From April 2007 to April 2008 the increase in the Consumer Food Price, as reported by Stats SA, was 15,7%.
South Africa’s producer price inflation (PPI) accelerated unexpectedly to 12,4% year-on-year in April, increasing the possibility of a bigger than previously expected interest-rate hike in June. Statistics South Africa said on Thursday headline PPI — which represents domestic output — accelerated from an upwardly revised 11,9% in March.
South African stocks remained modestly weaker at noon on Thursday, with banks weighing heavily on a deteriorating inflation outlook after worse-than-expected producer price inflation data and the South African Reserve Bank governor’s comments that the bank was considering a 200-basis-point interest-rate hike.
South African Reserve Bank Governor Tito Mboweni said on Wednesday that the task of the central bank is to maintain inflation in the 3% to 6% target band, and with CPIX (consumer inflation less mortgage costs) now at 10,4%, "drastic" measures are required. "This is way above the upper limit — you don’t have to be a genius to tell interest rates have to tighten," he said.
South Africa’s economic growth rate slowed to 2,1% in the first quarter of 2008 on a seasonally adjusted and annualised basis, official data showed on Tuesday, citing a sharp drop in mining due to a power crisis. Statistics South Africa said Q1 GDP slowed from 5,3% in the fourth quarter of 2007.
Global analysts Lehman Brothers wondered out loud on Friday morning whether some notably hawkish statements by Reserve Bank Governor Tito Mboweni on Thursday might be a signal that a rate hike of 100 basis points could be on the cards come June 12.
The South African Reserve Bank (SARB) said on Tuesday inflation was expected to rise, but that it remained committed to bringing the gauge within target range ”over a reasonable time horizon”. The targeted CPIX consumer inflation gauge has persisted above the top end of a 3% to 6% range since April 2007, and accelerated to a new five-year high of 10,1% year-on-year in March.
South Africa should be prepared to intervene in the foreign exchange market to keep its currency stable and ”competitive”, and should maintain its inflation targets, a group advising the government said. In its report released on Thursday, an international panel — known as the Harvard Group — also suggested a budget surplus of between 1% and 2% to help ease inflation.
The increase in the retail price of petrol by 55 cents per litre will result in a ”period of anguish” for South African households, an economist said on Wednesday. Absa economist Chris Hart said the increase would cause food prices to rise and fuel inflation. Hart said the country was expecting a hike in electricity prices as well as an increase in the rate of taxes.
Trade unions have to make sure that this year’s wage demands fully compensate workers for the drop in their real standard of living in the past year, the Congress of South Africans Trade Unions (Cosatu) said in its May Day message on Wednesday.
The South African Reserve Bank warned on Thursday that high household debt was a potential source of vulnerability and the growth in non-performing loans must be closely monitored. Elevated and volatile oil prices could also impact on economic and financial stability through higher inflation, interest rates and on an already large current-account deficit, it said.
South Africa’s producer price index (PPI) rose by 11,8% year-on-year in March from 11,2% in February, Statistics South Africa data on Thursday showed. Dawie Roodt, economist at Efficient Group, commented: "I am afraid all these price increases from producers will start filtering to consumers."
The JSE remained in the black at midday on Wednesday thanks to firm resources stocks, but banks and financials were under a bit of pressure. By 11.54am the JSE’s broader all-share index was up 0,34%. Resources added 1,01%, but the platinum-mining index, after having being stronger earlier, was now off 0,52% and the gold-mining index was down 1,14%.
First National Bank’s residential property barometer has dropped to the lowest level recorded for any quarter since its inception in 2003, media reports said on Monday. Up to 83% of people selling their houses had to accept a much lower offer than their asking price.
The South African Reserve Bank will be hosting the first round of regional monetary policy forum (MPF) meetings in May 2008. "Monetary policy has an impact on everybody. The main objective of the MPF meetings is to enhance the transparency of the bank’s monetary policy decision-making process and accountability to the public," it said.
The hike in the repo rate is bound at least to slow down economic growth and the rate of new job creation, said the Congress of South African Trade Unions (Cosatu) on Thursday. Cosatu said the increase raises the real possibility of retrenchments at a time when unemployment is still ”far too high”.
South African Reserve Bank Governor Tito Mboweni has raised the repo rate, at which the South African Reserve Bank lends money to banks, by 50 basis points to 11,5% following a two-day meeting of the bank’s monetary policy committee. The prime overdraft rate therefore increases to 15%.
Talk of China’s interest in a stake in BHP Billiton has sent the resources index northward and, in turn, helped the JSE advance further by midday on Wednesday. Dow Jones newswires said that the <i>Australian</i> reported in its Wednesday edition China is in the early stages of planning to buy a stake in miner BHP Billiton.
The interest-rate decision due on Thursday is not as straightforward as some hawks would proclaim, says Johan Rossouw, chief economist at Vunani. "In fact, understanding the monetary policy committee’s [MPC] interpretation of its mandate is of critical importance," he says.
Inflationary pressures pose a greater challenge to Southern Africa than global financial-market turmoil, South African Reserve Bank Governor Tito Mboweni said on Friday. It was important that regional economies continued to pursue price stability through appropriate monetary policies.
Resource heavyweights Anglo American and BHP Billiton — which make up a substantial portion of the JSE — helped the bourse extend its gains by midday on Friday, traders said. By noon, the JSE’s broader all-share index had lifted 1,21%. Resources collected 1,83%, and the platinum mining index was up 0,8%, but the gold mining index decreased 1,34%.
The JSE remained firm by midday on Thursday, but with very light volumes being traded as investors remained edgy ahead of the rates announcement next week, a dealer said. By midday, the JSE’s broader all-share index had gained 0,53%. Resources were up 1,08%, the platinum-mining index lifted 1% and the gold-mining index added 0,92%.
South Africa’s producer price inflation (PPI) accelerated above forecasts to 11,2% year-on-year in February from 10,4% in January, official data showed on Thursday.
Statistics South Africa said the headline number, representing domestic output, stood at 1,3% on a monthly basis, compared with 1% previously. Economists polled last week forecast that annual PPI would come in at 10,7%, while the monthly rate of increase was seen at 0,8%.
A senior bond-portfolio manager and an emerging-markets analyst from Lehman Brothers both uttered the same dreaded word soon after reading what Tito Mboweni had said in Parliament on Wednesday: hawkish. In fact, Lehman Brothers now predicts a 50-basis-point increase in the repo rate on April 10 to 11,5%.
South African Reserve Bank Governor Tito Mboweni warned consumers on Wednesday to tighten their belts further as higher food and fuel prices fan out into wider inflation. South Africa’s targeted CPIX inflation has surged through the top end of the bank’s 3%-to-6% band and hit a high of 9,4% year-on-year in February.
Mining counters gave the JSE some extra momentum on Wednesday, pushing the bourse more than a percent higher by midday. At noon, the JSE’s broader all-share index was 1,29% in the black, driven by a 5,45% rally in the platinum-mining index. Resources advanced 2,47% and the gold-mining index rose 1,07%.
The increase in South Africa’s consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank for its inflation target, was 9,4% year-on-year in February from 8,8% in January. The key drivers were higher food and petrol prices.
The Gautrain’s management on Thursday rejected suggestions that the project’s costs will rise to R35-billion. The project was well within budget, Gautrain Management Agency CEO Jack van der Merwe said. He was reacting to statements made by National Assembly transport committee chairperson Jeremy Cronin during a debate on Tuesday.
South African legislators have recommended that Parliament revise laws to give it more oversight over the Reserve Bank, raising concerns of political interference in monetary policy as inflation soars. The Reserve Bank has raised its repo rate by 400 basis points to 11% since June 2006 to try to tame inflation.