Inflation comes in higher than expected

Wednesday, March 25, 2009

Pretoria - South Africa's Consumer Price Index (CPI), which is the Reserve Bank's new inflation measure, increased a little higher than expected to 8.6 percent in February 2009, reports Statistics South Africa (Stats SA).

"This rate was 0.5 of a percentage point higher than the corresponding annual rate of 8.1 percent at January 2009," Stats SA said on Wednesday.

On average, prices increased by 1.2 percent between January 2009 and February 2009.

Speaking to BuaNews on Wednesday, Nedbank Economist Carmen Altenkich said: "the CPI was a little higher than we expected." She further predicted that March would be a difficult month.

Investment Solutions senior economist Chris Hart was also disappointed to see that the CPI had increased.

"Its disappointing that it rose from last month and that this was more than expected. This would suggest that inflation, particularly food inflation is a problem, we must however bear in mind that overall inflation is in a downward spiral," said Mr Hart.

The food and non-alcoholic beverages index increased by 0.2 percent between January 2009 and February 2009, taking the annual rate to 15.8 percent in February 2009, Stat SA reported.

The monthly increase in the food and non-alcoholic beverages index was largely driven by monthly increases in cold beverages, other food, meat and fish with increases of 4.2 percent, 0.5 percent, 0.4 percent and 0.2 percent respectively. Sugar, sweets and desserts also contributed 0.3 percent to the increase.

According to Stats SA, the alcoholic beverages and tobacco index increased by 1.1 percent between January 2009 and February 2009.

"The monthly increase in the alcoholic beverages and tobacco index was largely driven by monthly increases in beer with 1.5 percent and tobacco products with 1.2 percent, mainly cigarettes," Stats SA reported.

The transport index increased by 1.8 percent between January 2009 and February 2009, mainly due to a 10.5 percent increase in the price of petrol.

Mr Hart further added that he believed that another repo rate cut was still on the cards when the Monetary Policy Committee (MPC) meets in April.

On Tuesday the Reserve Bank announced a 100 basis points cut in the repo rate.

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