March inflation steady at 5.9%

Johannesburg - South Africa's headline consumer inflation undershot market expectations in March, coming in unchanged at 5.9% year-on-year compared with February, data showed on Wednesday.

However, on a month-on-month basis, inflation quickened to 1.2%, compared with 1% in February, Statistics South Africa said.

Economists had expected inflation to hit the ceiling of the Reserve Bank's 3% - 6% target band for year-on-year inflation and to quicken to 1.3% month-on-month in February.

Analyst Anisha Arora said: "While it's a good thing that CPI remains within the Sarb's 3%-6% target band. Overall, the March CPI print was not much of a surprise given the exogenous pressure of petrol prices, while the majority of other influences were of a seasonal nature.

"Core CPI, excluding petrol and energy, stands at 5.3% year-on-year, well within the target range. Thus we see little added concern for the MPC aside from possible future impacts from persistent rand weakness and volatility."

Economist Christie Viljoen said: "On the month-on-month number, it is a bit higher than what we saw for most of last year and there is an impact from the weaker exchange rate. The fact that it is below consensus isn't that interesting because most expectations remain on the upside.

"The year-on-year number will go above 6% at some stage during the second quarter but it doesn't mean we are expecting higher interest rates any time soon because the Reserve Bank looks at an average over a period of 12 to 24 months."

The yield on the benchmark 2026 bond fell to 6.995% by 08:17 GMT, from 7.025% before the data.

The rand was at R9.1534 against the dollar from R9.1400 before the data was released at 08:00 GMT.

Statistics South Africa has changed the weightings in its consumer price index basket to give a greater weight to petrol and electricity prices.

Growth in the services sector component of the CPI basket has increased, making it harder for the South African Reserve Bank to pinpoint the source of price pressures.

The Reserve Bank expects consumer inflation to temporarily breach the upper end of its 3%-6% target in the third quarter by averaging 6.3%, before slowing to 5.2% in Q4.

On Tuesday, the bank said the weaker rand exchange rate had caused a slight deterioration to the inflation outlook, but that price growth would remain within target.

The exchange rate, high petrol prices and wage pressures pose upside risks to CPI, the bank has said.