Sharp drop in consumer inflation | Fin24
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Sharp drop in consumer inflation

Feb 21 2018 10:31

Cape Town - South Africa's consumer price inflation came out at 4.4% in January 2018, in line with expectations and down from 4.7% in December 2017. This is mainly due to a drop in the fuel price.

The consumer price index (CPI) increased by 0.3% month-on-month (m/m) in January 2018.

Transport decreased from 0.9 of a percentage point in December to 0.6 of a percentage point in January. The index increased by 4.4% year-on-year.

Food and non-alcoholic beverages contributed 0.2 of a percentage point in January. The index increased by 1.3% m/m. Transport contributed -0.1 of a percentage point in January. The index decreased by 0.4% m/m. Miscellaneous goods and services contributed 0.1 of a percentage point in January. The index increased by 0.7% m/m.

In January the CPI for goods increased by 3.7% year-on-year (y/y), down from 4.1% in December. The CPI for services increased by 5,1% y/y, down from 5.3 % in December.

Provincial annual inflation rates ranged from 2.9% in North West to 5.2% in Western Cape.

FNB senior economic analyst Jason Muscat commented: "In the context of January’s inflation reading, there is sufficient justification for monetary policy easing to offset fiscal tightening. Many of the uncertainties regarding the inflation trajectory this year will be made clearer today (Wednesday), when the budget and proposed tax increases are outlined.

"We don’t think a one percentage point increase in the value-added tax (VAT) rate will derail the inflation path, particularly in the context of a much stronger rand and lower oil price. It may, however, send inflation towards the upper end of the target band (depending on the extent of tax increases), which could give the Reserve Bank reason to remain on hold for now.

"Again, much also depends on the outcome of Moody’s decision which is expected in early March."

inflation  |  sa economy  |  cpi


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