Wednesday November 25, 10:06 AM
INSTANT VIEW 2-S.Africa's Oct CPI inflation at 5.9 pct y/y
JOHANNESBURG, Nov 25 (Reuters) - South Africa's targeted consumer inflation slowed in line with expectations to 5.9 percent year-on-year in October, returning to the target band for the first time in more than 2-1/2 years, official data showed on Wednesday.
Statistics South Africa said annual headline CPI (NYSE: CPY - news) slowed from 6.1 percent in September while it was unchanged on a monthly basis compared with 0.4 percent the previous month.
A Reuters poll last week forecast CPI would slow to 5.9 percent year-on-year and come in at 0.1 percent on a monthly basis.
ANALYST COMMENTS
CHRISTIE VILJOEN, ECONOMIST, NKC INDEPENDENT ECONOMISTS
'Obviously it's good news to be back in the target band which is something that the Reserve Bank would have aimed for with its higher lending rates in the past few year.
'It creates some optimism in terms of consumer spending. But we should be a bit weary that the annualised rate could climb towards year-end again due to base effects.
'So, this is definitely not a break below 6 percent. For certain we should expect to see some high numbers in the coming months.
'I think the GDP growth number yesterday would be a bit more important than the inflation number today.
'Because we moved out of the recession it sort of implies that the chance for an interest rate cut is even lower and because of the risk that inflation will climb higher next year because of the Eskom situation.'
ELNA MOOLMAN, ECONOMIST, BARNARD JACOBS MELLET
'It was, of course, exactly in line with our forecast and we expect it to remain below 6 percent for November (Frankfurt: A0Z24E - news) as well.
'Unfortunately that will be followed by a couple of months that CPI is likely to spend outside the target range, but we expect it to be within the target range from around the second quarter of 2010.
'The sustainability of 5-6 percent inflation in our minds to a large extent depends on the magnitude of the electricity tariff increases as well as the trajectory for the rand and commodity prices.'
FREDDIE MITCHELL, ECONOMIST, EFFICIENT GROUP
'At 5.9 percent, we are within the target range of the Reserve Bank and that's pretty good news.
'What remains of concern is the proposed 45 percent electricity tariff increase by Eskom. We will see how long inflation will be maintained within the band.
'Consumer demand is depressed at the moment and there might be problems with inflation if consumer demand rises next year.'
MARKET REACTION
The rand was trading at 7.3966 against the dollar at 0944 GMT, from 7.3990 before the data was released at 0930 GMT. The yield on the 2015 government bond was at 8.375 percent, from 8.385 percent.
BACKGROUND
- CPI has been slowing gradually since peaking at nearly 14 percent year-on-year in August 2008. It was above the central bank's target band of between 3 and 6 percent from March 2007.
- The central bank last week left the repo rate unchanged at 7.0 percent for the third meeting in a row, citing an improved economic outlook and worries high power prices will stoke long-term inflation.
- Statistics South Africa data showed on Tuesday the economy exited its first recession in almost two decades with a 0.9 percent growth in the third quarter on a seasonally adjusted and annualised basis.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
