CPI rises to 5% in August

Image: FreeDigitalPhotos.net

"The headline CPI annual inflation rate in August 2012 was 5%. This rate was 0.1 of a percentage point higher than the corresponding annual rate of 4.9% in July 2012," said Stats SA.

Housing and utilities were the major contributors to the annual increase.

"The housing and utilities index increased by 0.2% between July 2012 and August 2012, mainly due to a 0.5% increase in water tariffs; a 0.7% increase in electricity tariffs and a 0.4% increase in assessment rates," said Stats SA.

On average, prices increased by 0.2% between July 2012 and August 2012.

In a research note earlier on Wednesday, Absa Capital said: "Today's CPI figure is an important one to watch, not only due to the upcoming MPC [Monetary Policy Committee] meeting tomorrow, but also because a temporary bottom might have been reached in food disinflation and by extension the headline figure," it said, adding that it forecasted CPI to edge up to 5.1% year-on-year.

Nedbank economists had predicted inflation to come in at 5%, saying they expected it to remain around 5% for the remainder of year, with softer spending and a weaker global economy likely to keep inflation contained throughout 2012.

The bank noted that the heat wave experienced by the US would place upward pressure on global food prices.

The MPC, following its meeting, will make an announcement on interest rates tomorrow afternoon.

At its fourth meeting of the year in July, the MPC announced its decision to slash the repo rate by 50 basis points down to 5%.

"We think that the MPC will keep rates unchanged tomorrow. The decision to either cut rates or keep them steady will depend on whether the combined global monetary stimulus sparks some recovery later in the year, in which case, rates are likely to remain stable.

"However, if the global economy slips into recession, then further easing can be expected. Our baseline view is that rates will remain stable with some reversal in policy easing possible in late 2013 or even early 2014," said Nedbank.

Prior to July's cut, the MPC had kept the repo rate at 5.5% for the last nine meetings.