Johannesburg - South Africa's consumer inflation is seen quickening slightly in February on stubbornly high food costs, but the deficit on the current account may have narrowed in the fourth quarter, a survey showed on Friday.
Fourteen economists polled by Reuters saw CPI rising to a consensus 8.2% year-on-year in February - the second month under a new re-weighted price basket - from 8.1%, and to 0.6% on a monthly basis from 0.4%.
The central bank is expected to cut the repo rate by 100 basis points to 9.5% next week as economic growth slows and after a sharp easing in inflation since August last year.
Rates have already fallen 150 basis points since December, after a 500 point rise between June 2006 and June 2008 to try rein in inflation.
Consumer inflation has remained outside the central bank's target of 3 to 6 percent since April 2007, largely due to high food prices.
"There is still a lot of uncertainty around the new index," said Peter Attard Montalto, emerging market economist at Nomura International. "Overall, we see key themes being high and sticky food price inflation and continued pass-through from the currency, wages and electricity prices."
However, economists polled expected producer price inflation to slow to 7.4% year-on-year, from 9.2% in January. Producer prices are seen falling 0.2% month-on-month.
"This is what the central bank will focus on, rather than the actual consumer inflation data, in indicating what the risks to the inflation outlook are," said Razia Khan, head of research for Africa at Standard Chartered.
Current account
The Reuters poll also found the deficit on the current account was expected to have narrowed to 7.6% of GDP in the fourth quarter, from 7.9%, partly on benign trade numbers, but it is a reprieve that will probably be short-lived.
"A calm before the storm. We expect a much larger number in the first quarter. The funding make-up will be of most interest and we expect it to be heavily reliant on short-term credit flow," Attard Montalto said.
Pressure on the current account is expected to remain after exports plunged by more than 25% in January on the back of falling global demand.
Trade figures, which will be released on March 31, are expected to show a deficit of R8.8bn, after January's record R17.4bn gap.
Concerns about South Africa's current account deficit, along with the impact of the global financial crisis, saw the rand weaken almost 30% against the dollar in 2008.
Portfolio investments, a key source of funding to cover the shortfall, registered outflows of R9.1bn in the third quarter.
"The key going forward is the ease of financing of a deficit of this magnitude - always a risk in an environment of reduced flows to emerging markets," Standard Chartered's Khan said.
The poll also found that growth in demand for credit would slow markedly as banks curb their lending to consumers.
Private sector credit extension was seen slowing to 10.72% year-on-year - a more than four-year low - from 11.85% and M3 money supply was expected to slow slightly to 12.25% from 12.91% in January.
- Reuters