Surprise drop in consumer inflation

Cape Town - Despite predictions of a rise, Statistics South Africa on Wednesday announced a modest drop in the country's consumer price inflation (CPI).

Stats SA data shows that the CPI dropped 0.1 of a percentage point in May to 6.1% from 6.2% in April.

On average, prices rose by 0.2% between April 2016 and May 2016.

The consensus forecast expected CPI to increase from 6.2% year-on-year in April to 6.4% in May.

The CPI has exceeded the South African Reserve Bank’s 3% to 6% CPI target since January, mainly due to steep drought-induced food price inflation.

However, Overberg Asset Management said in its weekly overview of the economic and political landscape in South Africa that there is growing evidence of pass-through inflation from the weaker rand.

Slightly below the consensus forecast of 6.4% and notably below the upper end of the consensus range of 6.0%, FNB predicted a May figure of 6.3%.

It said higher food prices and a gradual acceleration in rand sensitive components of the inflation basket should have been the main drivers of headline inflation.

Annual #CPI inflation eased to 6,1% in May 2016 from 6,2% in April 2016 #StatsSA https://t.co/Ju1hYwMlZM pic.twitter.com/Jaz1U3k23S

— Stats SA (@StatsSA) June 22, 2016