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JOHANNESBURG -  Headline inflation edged slightly higher in February, printing at 4.1% y/y compared to a 4% rise the previous month and slightly below our expectations of 4.2%.

The marginal upturn can largely be ascribed to higher fuel prices in the month, which climbed 0.9% y/y compared to a fall of 1.2% in January. 

Food prices were unchanged at 2.3% y/y against our expectations of a slightly higher reading of 2.7%. Health prices also surprised to the downside, particularly medical services which slowed to 5.7% y/y from 6.6% previously. However, the rise in insurance, just over 10% of the weight in the CPI basket, to 6.8% y/y compared to 6.5% in January was roughly in line with our expectations.      

Mamello Matikinca-Ngwenya, FNB Chief Economist said, "While headline inflation will likely climb higher in the coming months, largely due to rising food and utilities prices, we maintain our full-year 2019 inflation forecast of 4.7%. A relatively contained oil price, muted pass-through of anticipated exchange rate weakness, and constrained domestic demand limiting price pressures are among the main factors informing this expectation."