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CPI expected to be 6.0% y/y in May

19 Jun 2012

The consumer price index (CPI)‚ the measure used by the South African Reserve Bank (SARB) for its inflation target‚ is expected to have registered 6.0% year-on-year (y/y) in May from 6.1% y/y in April‚ according to a survey of leading economists by I-Net Bridge.

Forecasts among the 13 economists ranged from 5.8 to 6.2%.

The food and non-alcoholic beverages index‚ and the transport index‚ were among the highest contributors to the April y/y figure. The transport index increased mainly due to a strong petrol price hike in May.

Elize Kruger‚ economist with KADD Capital said that May was normally a low survey month‚ and that the main CPI driver on a month-on-month basis in May was likely to be the 28 cents a litre increase in the petrol price.

She also expected food prices to have added some upward pressure.

"The combination of higher fuel and higher food prices could result in a 0.3% month-on-month increase in CPI‚" she said.

The weaker rand is expected to lead to further increases in the food and non-alcoholic beverages component of CPI.

"Food prices are expected to start accelerating again on back of the weaker rand‚" Jana le Roux‚ economist at ETM Analytics said.

Efficient Group senior economist Dawie Roodt‚ said they expected a 6.1% y/y figure for May‚ forecast CPI to remain at these levels throughout 2012‚ and end the year at an average of 5.3%.

The Reserve Bank expected inflation to average 6.0% in the second quarter as well as in 2012 as a whole‚ then moderate to 5.5% in 2013.

While the correlation between CPI and PPI was not as strong as it used to be‚ the softer rise in PPI was pointing to reduced inflationary pressures‚ according to Econometrix chief economist‚ Dr Azar Jammine.

Producer inflation (PPI) growth has slowed in recent months‚ reaching a 6.6% y/y rise in April‚ from 7.2% in March‚ and 8.3% in February.

Annual CPI registered 5.0% in 2011‚ from 4.3% in 2010 and 7.1% in 2009. It was 11.5% in 2008.

The May CPI data will be released by Statistics SA at 10am on Wednesday‚ 20 June.

Source: I-Net Bridge

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