In April 2010, headline CPI inflation rose by only 0.2% month-on-month. This was below market expectations for a rise of 0.4%m/m. On an annual basis, CPI inflation eased further to 4.8%y/y from 5.1%y/y in March 2010. The market was expecting 5.0%y/y (STANLIB 5.1%y/y). This is the lowest level of consumer inflation since 2006.
During April 2010 there were only a few significant changes to inflation. The most notable aspects were an increase in transport costs, which rose by 1.2%m/m adding 0.2 percentage points to the monthly increase in inflation. This was mainly due to a 6.1%m/m increase in the petrol price. In contrast, recreation and culture cost fell by a significant 1.7%m/m in April. This appears to have been mainly due to a 2.1%m/m decline in the cost of recreational equipment (which would include computer type equipment) as well as a 4.9%m/m fall-off in the price of books, newspapers and stationery. These reductions, most likely, reflect the benefits of a stronger Rand since many of these items are imported.
CPI excluding food and fuel is still within the inflation target at 5.6%y/y, but services inflation remains on the high side at 6.5%. This is mainly due to the fact that electricity inflation is at 24.3%y/y, medical services inflation at 8.4%y/y, education inflation at 9.2%y/y, and water inflation at 9.4%y/y. These four services comprise 8.84% by weight of the consumer price index.
Consumer inflation is expected fall further over the coming months, helped partly by base effects, sustained low food inflation and very modest global inflation. Looking further-out, the recently announced electricity price hike, as well as the pending increase in water prices, other administered prices as well as a concerning increase in wage demands and some currency weakness will tend to push inflation somewhat higher in the second half of 2010 and into 2011.
For 2009, South Africa’s consumer inflation averaged 7.2%. In 2010, the average is expected to fall to around 5.0%, with inflation in the first half of the year averaging a little below 5%, but then trending modestly higher.
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