Food prices keep inflation in check

The consumer price index (CPI) was unchanged at 5.9% year-on-year in March‚ but rose 1.2% in the month from 1.0% in February‚ Statistics SA (Stats SA) said on Wednesday (17 April).

Inflation was expected to be at 6.0% year-on-year‚ according to a survey of leading economists by I-Net Bridge. Forecasts among the ten economists ranged from 5.4% to 6.1%.

The food and non-alcoholic beverages index fell by 0.1% between February and March‚ while the annual rate fell to 5.7% in March from 6.1% in February.

"Lower food price inflation has helped moderate the CPI and will improve its outlook for the year‚" KADD Capital economist Elize Kruger said.

Standard Bank economists were not expecting elevated food inflation in the short-term.

"We expect food inflation to remain below 10%‚" Standard Bank economist Shireen Darmalingam said.

The upward pressure on inflation came mainly from the transport index after an 81c-a-litre increase in the petrol price in March.

High survey month

March is a high survey month‚ which saw factors such as school fees and domestic workers' wages being added into the calculations.

Data showed that the transport index increased by 2.7% between February and March as a result of the petrol price increase‚ while the education index increased by 9.0% between those two months.

The housing and utilities index rose 0.8% between February and March mainly because of a 1.2% increase in actual rentals for housing and a 1.1% increase in owners' equivalent rent.

"There are specific price surveys carried out in March on transport (long distance bus fares‚ local bus fares‚ motor vehicle insurance‚ taxi fare‚ train fees) and housing and utilities (rentals and owner's equivalent rent)‚ and education which will have pushed up the monthly inflation. Additionally‚ sin tax increases came through as announced in this year's national budget‚" Investec Group SA chief economist Annabel Bishop said.

Stats SA showed that the miscellaneous goods and services index increased by 0.3% between February and March. The annual rate for this sector dropped from 7.5% in February to 7.4% in March.

The alcoholic beverages and tobacco index increased by 2.8% between February and March‚ mainly due to increases in excise duties. The annual rate decreased from 7,9% in February to 5.8% in March.

Nedbank economists expect inflation to remain below the Reserve Bank's 6% upper target for most of the year‚ with a marginal breach of the upper target in the third quarter.

"The main risk to the inflation outlook‚" Nedbank says,"is the currency‚ which has been quite volatile in recent weeks.

"Inflation should be contained by the oil price‚ which has been declining slowly in the past few weeks‚" Nedbank economists said.

The bank forecast that interest rates would remain unchanged for the rest of this year as the monetary policy committee will need to strike a balance between rising inflation and poor economic growth levels.

An encouraging sign was that core inflation‚ which is based on the CPI excluding food‚ petrol and energy‚ came in at 5.1% year-on-year in March‚ a slight decline from the 5.3% year-on-year figure in February.

Source: Business Day via I-Net Bridge