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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.

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