Monday July 6, 11:11 AM
UPDATE 2-Mauritius inflation slows on depressed demand
By Jean Paul Arouff
PORT LOUIS, July 6 (Reuters) - A gloomy economic outlook slowed spending in Mauritius and pushed the annual average inflation rate lower for the seventh consecutive month in June, analysts said on Monday.
Official data showed the inflation average fell to 6.9 percent in June from 7.4 percent in May. The import-dependent island has seen a steady downward trend since November when inflation surged to 9.9 percent on record high oil prices and food costs.
'The fall in the rate of inflation is due to a decrease in the aggregate expenditure especially consumption expenditure given the economic expectations are poor. People are cautious,' Chandan Jankee, associate professor at the University of Mauritius told Reuters.
Month-on-month prices rose 0.9 percent, the Central Statistics Office (CSO) said. The year-on-year inflation rate, calculated by Reuters, rose to 3.3 percent in June from 2.8 percent in May, although it was still well below December's rate of 6.7 percent.
The Consumer Price Index rose to 117.1 in June from 116.2 the previous month and 113.4 in June 2008.
Transport costs increased by 2.1 percent in June from the month before. Clothing and footwear prices rose by 1.6 percent while food and non-alcoholic drinks were up 0.9 percent.
Some analysts expressed surprise the annual average inflation rate had not dropped more sharply.
'I am asking myself whether the fall in inflation should not have been more pronounced given that demand is contracting and unemployment is rising,' Mauritian independent economist Ki Chong Lee said.
Housing and utilities was the only sector where prices fell marginally, by 0.1 percent.
Consistently one of Africa's most stable and wealthy economies, the palm-fringed island lies far from its core markets and is vulnerable to external shocks.
Last month, the central bank held its benchmark interest rate at 5.75 percent and cautioned that despite signs of inflation stabilising at a low level, plans to spur growth globally could accelerate prices at home and abroad. .
'We should remain cautious as things may change rapidly as petrol prices and prices of raw materials start to pick up,' Lee said.
The central bank said in April it expected annual inflation to fall to around 4 percent this year from 9.7 percent in 2008.
(Writing by Richard Lough; editing by Duncan Miriri/Ruth Pitchford) (For full Reuters Africa coverage and to have your say on the top issues, visit; http:/af.reuters.com/) Keywords: MAURITIUS INFLATION/
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