CPI on the rise after steep petrol hike

File picture: Neil Baynes / Independent Media.

File picture: Neil Baynes / Independent Media.

Published Oct 19, 2017


JOHANNESBURG - Last month’s 67cents increase in the fuel price saw September’s consumer price index (CPI) increase from 4.8% on a yearly basis in August to a higher-than-expected 5.1% year-on-year in September.

Housing and utilities inflation expanded 4.9% year-on-year last month, from 4.5% in August, with both actual rental prices increasing 5.7%. Meat prices rose 15.6%, while food and non-alcoholic beverage inflation moderated to 5.4% on a yearly basis, with bread and cereal prices contracting -2.8%.

Kamilla Kaplan, an economist at Investec, yesterday said that while CPI inflation was up in September on fuel price pressures, it was expected to moderate into the year end.

“The lift in CPI inflation in both August and September was mainly on account of the transport component. Transport inflation rose to 5.6percent year-on-year in September from 3.9percent in August.”

“Based on a weighting of 14.28percent, this translated to a higher contribution to the year-on-year headline CPI of 0.8percent versus 0.6percent in August,” Kaplan said. Annual core inflation rate - which excludes the cost of food, non-alcoholic beverages, fuel, and energy - stood at 4.6percent in September, unchanged from August’s five-year low.

Jason Muscat, a senior economic analyst at FNB, said that the scope for further rate cuts was diminishing, and expected the Reserve Bank to keep rates unchanged at the November Monetary Policy Committee meeting. “We think it is likely that the bank will wait to let much of the event risk, rating agency assessments, Eskom tariff application, and the ANC November elective conference play out before moving on rates, rather than lowering in November only to have to reverse the cuts should event outcomes stoke fears of higher inflation,” Muscat said.

The central bank last month kept its repo rate unchanged at 6.75percent. Daniel Mminele, the deputy governor of the South African Reserve Bank (Sarb), earlier this week said that the bank was taking a cautious approach to monetary policy as risks to the inflation outlook were on the upside.

“If anything, domestic financial market indicators seem to broadly echo the Sarb’s view that the uncertain environment is forcing a cautious approach to policy,” Mminele said. However, John Ashbourne, an Africa economist at Capital Economics, yesterday said that he still expected the central bank to cut interests rates. “Despite hawkish language from the deputy governor of the South African Reserve Bank, we still expect that policymakers will cut rates over the coming quarters,” he said.


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