Economists predict lower CPI

Tuesday, August 25, 2009

Pretoria - Economists are expecting the Consumer Price Index (CPI) figure, the official measure of inflation in South Africa, to continue its downward trend when it is released later this week.

Statistics South Africa (Stats SA) will release the data for July on Wednesday.

"We are looking at 6.7 percent in July from 6.9 percent in June," said Economist at Nedbank, Isaac Matshego, on Tuesday.

He explained to BuaNews that lower food prices would contribute to a lower inflation and fall in the CPI.

Standard Bank is predicting that the CPI will come in at 6.8 percent year-on-year.

Economist Danelee van Dyk said there have been increases in municipal tariffs and they expected this to contribute to the CPI. She added that lower food prices were encouraging for CPI.

"However, the downward trend does not necessarily mean that the trend would continue indefinitely," she said.

According to the Reserve Bank website, the CPI is a yardstick of the general level of prices in the economy.

The CPI is an index of the prices of a representative "basket" of consumer goods and services. The CPI thus represents the cost of the "shopping basket" of goods and services of a typical or average South African household.

"The total South African CPI basket consists of about 1 500 different consumer goods and services which are classified into more than 40 groups and subgroups, for which separate indices are constructed," said the bank.

Stats SA collects the price information each month mainly by sending questionnaires to about 3 600 retailers. Some prices are collected directly by officials.

The bank therefore explained that the compilation of the CPI for each month takes some time and is published during the second half of the following month.

The Producer Price Index (PPI), the prices of goods leaving factories and mines, will be released on Thursday. In June, the PPI dropped to 4.1 percent year-on-year.

This figure is expected to come in at between -4.0 and -4.7percent from June's 4.1 percent.

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