SA inflation lower than expected

Johannesburg - The increase in South Africa's consumer price index (CPI), which is used by the Reserve Bank for its inflation target, was 4.2% year-on-year in June, down from 4.6% in May, Statistics SA said on Wednesday.

It remains well within the target band of between 3% and 6%.
   
CPI was at 0.0% month-on-month from 0.2% in May.

CPI was expected to have decreased to 4.5% y/y, according to a survey of leading economists by I-Net Bridge, with forecasts among the 10 economists ranging from 4.3% to 4.7%.

This is what economists had to say:

Carmen Altenkirch, Economist at Nedbank: 

"Certainly very good news, coming in well below expectations," said Nedbank economist Carmen Altenkirch. "Downward pressure probably came from lower food and goods inflation, particularly durable and semi-durable goods. Over the month, the main upwards pressure came from higher housing costs."

She said inflation is expected to pick up slightly, ending the year around 5% if stronger domestic demand enables retailers to regain some pricing power. However a strong rand and disinflation abroad will help to contain price pressure.  

"Although we expected the MPC to leave interest rates unchanged, last week's more dovish statement suggests there is still a chance of another cut
in this cycle, particularly if the economy stalls in the coming months and inflation continues to surprise on the downside," she said.

 - I-Net Bridge