Johannesburg – Statistics
SA says the inflation rate for January has moderated to 6.6 percent, from 6.8
percent seen in December.
The official
statistics body also says, on average, prices increased by 0.6 percent between
December 2016 and January 2017.
In a statement, First
National Bank says this shows inflation is “turning the corner” as the
year-on-year figure is lower.
Over the month,
inflation was up 0.6 percent, led by food, transport and miscellaneous goods
and services, it notes.
Core inflation pulled
back notably, increasing 5.5 percent relative to the 5.9 percent recorded in
December, suggesting that inflationary pressures eased somewhat over the month,
it says.
Core inflation strips
out extremely volatile items such as food.
Read also: Inflation at highest level in six months
FNB notes food
inflation remained elevated in January rising 11.7 percent year-on-year, supported
by high meat prices which rose 8.9 percent year-on-year.
This price increases
could be a lag effect of the drought pushing food prices up being felt now.
FNB also noted bread
and cereals gained 17 percent year-on-year, while dairy products and fish
prices both rose 11.1 percent.
The bank adds the 50c/l
rise in petrol prices translated into a 7.3 percent year-on-year rise in fuel
costs.
In addition, inflation
for new vehicles remained elevated at 8.6 percent, suggesting that dealers are
passing on costs to the consumer despite the poor performance of vehicle sales.
The bank expects inflation
to continue to trend lower and to return within the South African Reserve Bank’s
targeted 3-6 percent range in the last quarter of the year.
“Based on our
estimates, inflation should average 5.9 percent this year, however, continued
rand strength (at the time of writing the rand was R13 to the dollar) should
also bode well for the inflation outlook.”
FNB adds the possible
sugar tax, if implemented, should have a minimal impact on overall inflation,
but higher than anticipated meat prices pose upside risk to its inflation
forecast.
Despite the easing,
inflation is not decelerating enough to prompt interest rate cuts.
The prime lending rate
is currently 10.25 percent after SARB held it stable at its last meeting.
FNB anticipates the
bank waiting until inflation falls below 5 percent before it starts easing on
rates.
BUSINESS REPORT ONLINE