Food, fuel drive consumer inflation

15 December 2011

Consumer inflation breached the South African Reserve Bank’s target range of 6% in November, driven by higher food and energy prices.

“The headline CPI [Consumer Price Index] annual inflation rate in November 2011 was 6.1%. This rate was 0.1 of a percentage point higher than the corresponding annual rate of 6% in October 2011,” Statistics South Africa said on Wednesday.

On average, prices increased by 0.3% between October and November 2011. The food and non-alcoholic beverages index increased by 0.5% between October and November 2011.

The market had expected consumer inflation to rise to 6.2%.

Continuing upward trend

Nedbank economists expect inflation to continue on its upward trend in the coming months, coming off a low base. Higher food and administered prices (regulated prices like fuel and electricity) are expected to remain the main drivers of inflation.

“It seems likely that the Reserve Bank will keep interest rates unchanged for most of 2012 unless evidence of second-round inflationary pressures emerge,” Nedbank said.

“For the moment, the Bank will continue to focus on the threat posed by the on-going European debt crisis and the adverse effects on domestic growth, particularly if the recession in Europe turns out to be more severe than many anticipate.”

Standard Bank economists said the door remained open for further interest rate cuts in 2012, given evidence of a slowdown in the domestic and global economy.

“However, we maintain our base case scenario that the SARB is likely to keep the repo rate unchanged at 5.5% next year,” Standard Bank said

Source: BuaNews