Inflation shocker: Breaches 6% – more squeeze expected (includes tables)

By Fadia Salie

Cape Town – Consumer price inflation (CPI) has breached the upper limit of the South African Reserve Bank’s (Sarb’s) target range by accelerating to 6.2% year-on-year in January 2016. The consensus forecast for headline CPI, which includes the volatile food and energy components, was for an increase to 6.0% in January. The Sarb’s target rage is between 3% and 6%.

Statistics SA announced on Wednesday that the headline CPI (for all urban areas) annual inflation rate in January 2016 was 6.2%.

South Africa's banknotes, which features an image of former president Nelson Mandela on the front in Pretoria November 6, 2012. REUTERS/Siphiwe Sibeko
South Africa’s banknotes, which features an image of former president Nelson Mandela. REUTERS/Siphiwe Sibeko

This rate was 1.0 percentage point higher than the corresponding annual rate of 5.2% in December 2015.

On average, prices went up by 0.8% between December 2015 and January 2016.

The sharp inflationary increase is attributed to the base effect of comparatively low energy prices a year ago and the impact of the drought on food prices, said analysts at Overberg Asset Management in its weekly overview of the South African economic environment.

“Food price inflation has been compounded by the weaker rand and the need to import food as a result of the drought.”

At its last policy meeting, the Sarb lifted its CPI forecasts for 2016 and 2017 from a previous average of 6% and 5.8% to 6.8% and 7% respectively. The rand, which traded at around R15.81 before the release of the numbers, weakened further to trade at R15.83 shortly after the CPI numbers were announced. – Fin24

Source: http://www.fin24.com/Economy/inflation-shocker-20160217-2

TABLE – South Africa’s January headline CPI rises to 6.2 pct year-on-year

JOHANNESBURG, Feb 17 (Reuters) – South Africa’s headline consumer inflation quickened more than expected to 6.2 percent year-on-year in January, compared with 5.2 percent in December, data from Statistics South Africa showed on Wednesday.

Percentage change
Y/Y M/M
Jan Dec Jan Dec
Food, NAB 6.9 5.9 1.9 0.6
Alcohol bev, tobacco 8.3 6.6 2.0 -0.4
Clothing, footwear 4.4 4.5 0.3 0.3
Housing, utilities 6.6 6.6 0.0 0.8
Household contents 3.4 3.5 0.2 0.5
Health 5.6 6.3 -0.2 0.1
Transport 5.5 1.9 0.5 0.2
Communication 0.3 0.2 0.1 0.0
Recreation and culture 6.0 2.6 3.7 -0.4
Education 9.3 9.3 0.0 0.0
Restaurants, hotels 5.7 5.0 0.7 0.1
Miscellaneous goods 6.9 6.7 0.7 0.0
All items 6.2 5.2 0.8 0.3
Percentage change
Y/Y M/M
Jan Dec Jan Dec
Very low expend 6.6 5.7 1.4 0.3
Low expend 6.3 5.5 1.2 0.4
Middle expend 6.2 5.2 1.1 0.3
Higher expend 6.3 5.2 0.9 0.3
Very high expend 6.2 5.3 0.7 0.3