Johannesburg - The increase in South Africa's consumer price index (CPI), which is used by the South African Reserve Bank (Sarb) for its inflation target, was up 5.7% year-on-year (y/y) in February from 6.2% y/y in January, Statistics South Africa (Stats SA) said on Wednesday.
CPI was at 0.6% month-on-month (m/m) from 0.3% m/m in January.
CPI was expected to have registered 5.7% y/y, according to a survey of leading economists by I-Net Bridge. Forecasts among the economists ranged from 5.5% to 5.9%.
The CPI edged below 6% in February after moving above the 6% mark the previous two months.
Statistics SA said the food and non-alcoholic beverages index decreased by 0.4% between January and February. The annual rate slipped to 1.8% in February from 2.4% in January.
The monthly fall in the food and nonalcoholic beverages index was largely driven by monthly decreases in fruit (-3.2%), vegetables (-1.6%), meat (-0.7%), bread and cereals (-0.3%), milk, eggs and cheese (-0.3%), oils and fats (-0.3%), other food (-0.3%) and fish (-0.2%).
These drops were counteracted by monthly increases in cold beverages (2.9%) and hot beverages (0.1%).
The clothing and footwear annual rate fell to 3.1% in February from 4.0% in January, but the monthly index was unchanged.
The household contents and services annual rate slid to 1.6% in February from 2.6% in January. The monthly index decreased by 0.2% between January and February.
The health index increased by 5.0% between January and February, mainly due to an 8.1% monthly increase in medical services. The annual rate fell to 9.0% in February from
The transport annual rate decreased to 5.1% in February from 6.2% in January, while the monthly index went up by 0.7% between January and February mainly due to an 18c/l increase in the price of petrol.
The miscellaneous goods and services index rose by 3.5% between January and February, mainly due to a 13.2% monthly increase in health insurance. The annual rate dropped to 8.9% in February from 9.2% in January.
CPI in 2009 struck 7.1% from 11.5% in 2008. CPIX hit 11.3% in 2008 from 6.5% in 2007.
The core inflation rate, which excluded volatile foods, municipal rates and monetary policy changes, is no longer provided. CPI reverted to a new basket and weights in January last year, with the CPIX becoming superfluous as CPI now includes owners' equivalent rent.
Feedback from economists
Economists said that the news was positive, and in line with forecasts.
Elize Kruger, Economist at KADD Capital said:"It is in line with expectations, so there were no nasty surprises there. It's positive that it has moved below 6% and we expect it to remain below 6% for the foreseeable future.
"I doubt that it will have any material impact on Sarb's interest rate decision on Thursday as the move below 6% was anticipated by the Sarb and most
economists. I think the stronger rand will have more of an impact on the decision."
Efficient Group economist Freddie Mitchell said:"Overall, the figure looks pretty good, and is very much what market had expected."
Chris Hart, Economist at Investment Solutions said: "It's looking quite good. The question now is: will the central bank, with the strength of the rand, be tempted to cut rates?"
Nedbank economist Carmen Altenkirch said: "Finally, inflation is now firmly back in the target range and is expected to remain there for the rest of 2010.
"Inflation should reach its trough in May, declining to just below 5%, before picking up once again in the second half of the year. The main driver of inflation remains services inflation - insurance costs rose 6.3% m/m, while medical services increased by 8.1% m/m.
"Attention now turns to MPC decision tomorrow [Thursday]. We still expect that the MPC will keep rates steady. However, there is a significant chance that the Reserve Bank could take advantage of today's dip in consumer inflation and the expected moderation over the coming months as well as the more flexible interpretation of their mandate to ease rates one last time."
- I-Net Bridge