SOUTH Africa’s consumer price index (CPI)‚ used to measure inflation‚ increased to 5.9% year on year in February from 5.8% in January‚ Statistics SA said on Wednesday.
Inflation had been expected to remain unchanged at 5.8% year on year in February according to a BDlive survey of leading economists. Forecasts among the 11 economists ranged from 5.7% to 6%.
Kadd Capital economist Elize Kruger said the February figure was “uncomfortably close to 6%, which is where the Reserve Bank wouldn’t like it to be”.
The Bank targets inflation in a range of 3%-6%.
“Having said that, it is interesting to note that core inflation is unchanged at 5.3% for the sixth consecutive month,” said Ms Kruger. “The significant upward trend in core inflation that the central bank has been anticipating has not happened, which makes the upcoming monetary policy committee meeting interesting.”
Core inflation, which excludes the volatile prices of food, non-alcoholic beverages, petrol and energy, was unchanged at 5.3% year on year but quickened to 1.2% month on month.
Investec chief economist Annabel Bishop said: “The 39c/litre petrol price hike in February contributed small upward price pressure to the same month’s inflation outcome, but it is important to note that the petrol price rose 36c/litre in March, compared with 81c/litre in March last year, and this resultant base effect will subdue overall CPI inflation in March, pulling it down toward the 5.5% year on year mark in the next print.”
Nedbank economist Johannes Khosa said the inflation number was in line with expectations. “The main category that drove prices higher was transport, showing the impact of the weaker rand and higher fuel prices.”
CPI increased 1.1% month on month in February from a 0.7% month-on-month increase in January.
Ms Bishop said there was “less evidence of direct inflationary effects from rand weakness”, adding that the rise on the month was mainly driven by higher medical aid tariffs, as occurred at the start of each year.
“The rand has pulled back from January’s lows and the direct impact on inflation is therefore waning as petrol price increases lessen and commodity prices (including agricultural) moderate,” Ms Bishop said.
Inflation averaged 5.7% in 2013 compared with an annual average of 5.6% in 2012, 5% in 2011 and 4.3% in 2010.
Nedbank’s Mr Khosa said the rand was expected to remain a risk to the inflation outlook. “We expect inflation to breach the upper end of the Bank’s target band next month, while the next move on interest rates is most likely to happen in May.”