Johannesburg, 19 September 2018 – The slowdown in the official inflation number released by Statistics South Africa (StatsSA) today is encouraging as beleaguered businesses in the Metals and Engineering (M&E) cluster and over-indebted consumers are afforded a reprieve from generally rising prices of goods and domestic inputs underpinned by a weaker rand and an ever-increasing petrol price, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said this morning.
According to the StatsSA data, the annual CPI was 4,9 percent in August 2018, down from 5,1 percent in July 2018. On a month-on-month basis, the index also registered a decrease of 0,1 percent in August 2018.
“This is good news as businesses in the M&E cluster are struggling in an environment of weak domestic demand, including a less-than-proportionate increase in consumer demand. Accordingly, the dip in inflation provides relief to cost pressure on the diverse domestic intermediate inputs of the M&E cluster,” SEIFSA Chief Economist Michael Ade said.
Dr Ade said it was particularly encouraging to read that the data placed the official inflation numbers 0,2 percentage points lower from the July figures and well within the South African Reserve Bank’s inflation target band of 3 to 6 percent.
“With the country desperately needing a countervailing economic stimulus to return the economy to health, the latest inflation data provide a firm rationale for the Reserve Bank’s Monetary Policy Committee to leave repo rates unchanged or even cut the repo rate by at least 25 basis points in order to encourage spending, boost domestic demand and lessen increasing pressure faced by both businesses and individual consumers,” said Dr Ade.
However, he also warned that galloping petrol prices, volatile exchange rate and generally increasing electricity prices – including the potentially negative effects of a global trade war – may discourage the committee from taking an expansionary monetary policy stance since that may ultimately be inflationary.
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