SEIFSA CAUTIOUSLY WELCOMES CPI REPRIEVE WHICH RELIEVES CONSUMERS
The headline consumer price index annual inflation for August 2016 is 5.9%, marginally down by 0.1 of a percentage point from 6% in the same period last year. This decreased prices by 0.1% between July 2016 and August 2016, trimming only slight pressure off consumers. Core inflation – which excludes food, petrol and energy prices – recorded a 5.7% increase over a comparable period, maintaining the same reading as a month earlier.
Commenting on the latest figures, SEIFSA Economist Tafadzwa Chibanguza welcomed the existence of an underlying trend of inflationary reprieve, saying that consumers will welcome the much-needed relief, albeit minimal.
“Consumers have been under a lot of financial pressure in the last few months and the latest reading on consumer inflation from StatsSA will offer some much-needed reprieve,” Mr Chibanguza said.
However, Mr Chibanguza said that this emerging picture should be viewed with a degree of caution since both readings (headline and core) place at the upper edge of the South African Reserve Bank’s inflation target of 3% to 6%.
Mr Chibanguza said the main contributor to the annual inflationary decrease was the transport sub-component, which decreased two basis points as a result of an average 7.2% decrease between petrol and diesel prices. At the same time, the recreation and culture component increased one basis point in the comparable period, resulting in the net one basis point decrease in the August 2016 annual reading.
He said that the strength of the Rand against the US Dollar in August also contributed significantly to the inflation outcome.
Since the end of June, the Rand had been on a strong recovery path, with the strongest points being recorded in August. Over this period, the currency recovered by 12.7%, trading below $1/R14 for the first 24 days of August.
“This undoubtedly contributed to the August 2016 reprieve. Unfortunately, it would not take a lot of factors to go wrong to reverse the trend and place us outside of the upper end of the target range,” Mr Chibanguza said.
He said that continuation of the current scenario – with the Rand/Dollar exchange rate below $1/R14 and strengthening, Brent crude oil trading below $50/barrel, a weak economy and consumers still being under pressure – was likely to lead to the Monetary Police Committee (MPC) of the Reserve Bank leaving the interest rate unchanged at the conclusion of its meeting tomorrow.
“The inflation reading announced today would give the MPC one more reason to hold back from a rates increase for now, providing further relief to the consumer,” Mr Chibanguza concluded.
SEIFSA welcomes slight improvement in the CPI
SEIFSA WELCOMES SLIGHT IMPROVEMENT IN THE CPI
JOHANNEBURG, 15 February 2017
The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) today welcomed the marginal reprieve in the Consumer Price Index (CPI) and expressed confidence that its forecast of a 1,4% growth in the sector for the year was on track.
Data released by Statistics South Africa (StatsSA) indicate that the January 2017 CPI fell by 0.2 percentage points (from 6,8% to 6.6%) in December 2016. This is the first decline in the past four months. This reading is on par with StatsSA forecast of 6.6%, revised up from 6.1% in their 2017 forecast.
SEIFSA Economist Roberta Noise said that although the 0.2 percent drop is a positive development, the 6.6% CPI is still the highest in the past seven years, with the last highest reading of 8.1% having been in January 2009 when compared on a year-on-year basis. At 6,4%, this is also the highest annual average for the year since 2009, during which CPI averaged 7.1%.
“These statistics simply reflect the severity of the impact on consumer prices caused by the El Nino drought on the back of volatility in petrol prices during 2016. Regrettably, the CPI has stubbornly remained outside the Reserve Bank’s target range of 3% - 6% throughout most of 2016,” said Ms Noise.
According to StatsSA, significant contributors to the latest CPI improvement include food and non-alcoholic beverage (0.3), transport (0.2) and miscellaneous goods (0.1) on a month-to-month comparison. The 50c/l petrol price increase in January 2017 is the main contributor to the increase of 1,5% in transport on a month-on-month basis as a direct result of the reduction in the supply of Brent Crude oil, which has been cut by 600 000 barrels per day following the December OPEC agreement.
On the other hand, core inflation for January 2017 was recorded at 5.7% when compared to January 2016, which excludes volatile variables such as food and fuel. Ms Noise said that this provides a more stable indication of consumer price movements.
Ms Noise said she was alarmed that inflation increased on a year-on-year basis by 0.6 percentage points when January 2017 (6.6%) is compared to January 2016 (6.2%).
Although this pattern is expected to continue in 2017, StatsSA forecasts indicate that CPI should ease in the last quarter of 2017 and fully return to the 3% - 6% target range in 2018.
“Such a scenario may indicate some light in the horizon for the metals and engineering sector, affirming SEIFSA’s forecast that the sector would grow by 1.4% in the 2017/2018 period,” said Ms Noise.