SOUTH AFRICAN INFLATION RATE EDGES UP TO 5.4 PCT IN MAY

JOHANNESBURG,South Africa’s targeted consumer price inflation registered 5.4 per cent in May, slightly up from 5.3 per cent in April, reports Statistics South Africa (StatsSA), which says the the marginal increase in headline inflation was driven by some food items, including meat, and transport.

The good news is that certain food items have recorded deflation, resulting in the Consumer Price Index (CPI) remaining within the target range of between five and six per cent for the second straight month.

Food and transport have continued to be the major drivers of inflation. Food prices climbed by a higher-than expected 0.6 per cent month-on-month on the back of bigger increases in prices of processed foodstuffs, including meat.

Higher meat prices are attributed to the current shortage in meat supply following culling activities carried out in 2016 in response to severe drought conditions. However, prices of some food items are falling sharply.

On the food prices we have seen some subsistence in inflation rate; in fact, we have seen some deflation on year-on-year basis in oils and fats products like cooking oil and margarine, as well as for vegetables. We have also seen the price of bread and cereal products which include products like bread and maize meal dropping by 0.5 per cent from April to May, said Patrick Kelly, the head of Price Statistics at StatsSA.

Economists are confident that the current deflationary momentum, including the price of maize meal and cereals, will continue to push food prices lower in the months ahead.

Other economists say the Reserve Bank will not be quick to cut rates despite expectations of a lower inflation rate.

Nedbank economist Busisiwe Radebe forecast that inflation would resume its downward trend in the June data. Radebe expects the central bank to start with its monetary easing in early 2018.

The Rand is very volatile and that is the biggest threat. If we didn’t have that threat it would be a straightforward thing that the next move will be down because we don’t know the Bank will be cautious to see what is going to happen the next move will probably be down in 2018.

Source: NAM NEWS NETWORK