Food price growth drives slightly higher than expected inflation

Ntsakisi Maswanganyi

SOUTH Africa’s consumer price index (CPI)‚ used to measure inflation‚ increased to 5.8% year on year in January from 5.4% in December‚ Statistics South Africa said on Wednesday.

Inflation was expected to have increased to 5.7% year on year‚ according to a survey of leading economists by BDlive.

Forecasts among the 10 economists ranged from 5.6% to 5.8%.

Elna Moolman‚ an economist at Macquarie Securities‚ said: “The 5.8% year-on-year CPI for January was exactly in line with our forecast‚ albeit slightly higher than the market’s expectation.

At this stage‚ we expect inflation could be at the 6% target ceiling in February.

“The data have no implications for our view that the Reserve Bank will continue to hike interest rates‚ but we still expect a gradual and shallow rate-hiking cycle.”

Nedbank economist Busisiwe Radebe said: “The concerns the South African Reserve Bank had around inflation at its last monetary policy meeting when it raised interest rates by 50 basis points are starting to play out.

We see that particularly with the stronger than expected month-on-month rise in food prices‚ which was the main reason inflation rose by more than our expected 5.7%.

“We expect the bank will raise rates by another 50 basis points at its next meeting in March‚ thereafter keeping rates steady until the second half of 2015.”

Jana le Roux‚ an economist at ETM‚ said the figure was driven by stronger than expected food price growth.

“The transport component was also key — the increase in fuel prices along with the rising trend in vehicle purchasing costs have definitely played a role.”

The CPI increased by 0.7% month on month in January from a 0.3% month-on-month increase in December.

Inflation averaged 5.7% in 2013‚ compared with an annual average of 5.6% in 2012‚ 5% in 2011 and 4.3% in 2010.

The food and non-alcoholic beverages index increased by 1.6% between December 2013 and January 2014‚ while the annual rate rose to 4.3% in January 2014 from 3.5% in December 2013.

These were the food and non-alcoholic beverages that increased: vegetables (4%); other food (2.4%); fish (2.3%); meat (2%); cold beverages (2%); bread and cereals (1%); sugar‚ sweets and desserts (1%); fruit (0.9%); hot beverages (0.5%); and milk‚ eggs and cheese (0.4%).

Oils and fats were the only component that fell by 0.4%.

The transport index increased by 1.2% between December 2013 and January 2014‚ mainly due to a 38c/l increase in the petrol price.

The annual rate increased to 7.8% in January 2014 from 6.3% in December 2013.

The miscellaneous goods and services index increased by 0.5% between December 2013 and January 2014‚ while the annual rate was unchanged at 7% in January 2014.

The provinces with an annual inflation rate lower than or equal to headline inflation were Western Cape (5.7%)‚ Free State (5.7%)‚ Eastern Cape (5.5%)‚ Northern Cape (5.3%)‚ Mpumalanga (5.2%) and North West (5.1%).

The provinces with an annual inflation rate higher than headline inflation were Limpopo (6.4%)‚ KwaZulu-Natal (5.9%) and Gauteng (5.9%).

Old Mutual Investment Group economist Johann Els said: “Inflation is set to come down in the second half due to low demand in the economy.

We expect pass-through from the weaker rand to be much less than in the past.” © BDlive 2014


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