Share

Consumer inflation slows to 5.4%

Johannesburg - South Africa's headline consumer inflation slowed to 5.4% year-on-year in January, well below the market's expectations, from 5.7% in December, Statistics South Africa said on Wednesday.

Inflation was at 0.3% on a month-on-month basis in January compared with 0.2% in December, lower than market consensus of 0.55%.

Economists had expected inflation to come in at 5.7% year-on-year in January. The release is the first one under a rebasing from a 2010-2011 household spending survey.

Peter Attard Montalto, economist at Nomura said: "The new re-based and re-weighted CPI index comes in at 5.4%t which is quite a bit lower than the 5.7% we looked for.

"There were unlikely to have been enough surprises in actual underlying prices to drive this and we already have the weights so the difference must come from a mix of the methodological changes and the re-basing exercise.

"Whilst the MPC is looking through this exercise and are still concerned about the possibility of pass through from wages, and whilst this won't be enough to add back into our forecast a final rate cut, we do still highlight the much larger probability of a final cut than the market current expects."

Analyst Anisha Arora said: "Overall the impact of the reweightings has been negligible, and even under the original 2008 weights, the figures would have been very similar.

"This is due to the fact that while food prices ticked up in January, under the new basket less weighing is placed on food, from 15.68% to 15.41%.

"Indeed a greater weighting has been put on petrol at 5.68% from 3.93% previously, but petrol prices dropped 1.2% month-on-month, which cancels out the increased weighting.

"The MPC will be comfortable with this 5.4% year-on-year rate, which is coming lower within the 3%-6% target band, and indeed the risks to headline inflation for 2013 may be not be as large as initially expected.  

The rand was at R8.84 against the dollar at 08:18 GMT, from R8.8550 before the data was released at 08:00 GMT.

The yield on the 2026 bond dropped to 7.185 % from 7.225%.

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

The SA Reserve Bank was able to cut interest rates for the first time in 20 months in July partly because of softer-than-expected inflation prints.

It left rates unchanged in the three meetings since, but said the risks to the inflation outlook were on the upside with a weak rand exchange rate and higher expected wages the main risk factors. 



We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders