Inflation falls to 6.7% in July

Wednesday, August 26, 2009

Pretoria - The Consumer Price Index, used to measure South Africa's inflation, continued on its downward trend in July, falling to 6.7%, Statisitics South Africa (Stats SA) announced on Wednesday.

The July rate was 0.2 percent lower than the corresponding annual rate of 6.9 percent recorded for June.

"It is more or less what we expected," Standard Bank economist Danelee van Dyk told BuaNews.

She said inflation was likely to fall into the Reserve Banks three to six percent target range by March next year. "However, we do not foresee further interest rate cuts for the rest of the year," she said.

The Reserve Bank's economic policy is based on inflation targeting.

"We expected higher municipal and electricity tariffs to have an impact on CPI. The fact that food prices are going down bodes well for inflation," Ms van Dyk said.

According to data, food and non-alcoholic beverages index decreased by 0.4 percent in June and July with the annual rate decreasing to 8.3 percent in July from the 10.2 percent recorded last month.

"The monthly decrease in the food and non-alcoholic beverages index was largely driven by monthly decreases in vegetables (-1.8percent), meat (-1.1percent), oils and fats (-0.8percent) and bread and cereals (-0.5percent)," said Stats SA.

Vehicle sales also contributed to a lower CPI.

"The transport index increased by 0.7 percent between June and July. This was mainly due to a 37cents per litre increase in the price of petrol. The annual rate decreased to -3.4percnet in July 2009 from -2.1percent in June 2009," it said.

Ms van Dyk said it was unfortunate the services index increased again. The index increased by 1.8 percent between June and July.

"This highlighted that inflation is still relatively stubborn, however, we expect to see inflation come in at 6.3 percent in October before reaching 6.7 percent by December," said Ms van Dyk.