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No sign of inflation coming down to 6percent

By unknown | Aug 30, 2007 | COMMENTS [ 0 ]

Robert Laing

Robert Laing

Inflation accelerated to 6,5percent in July, defying a consensus among economists that it would start heading down towards government's 6percent ceiling.

The consumer price index excluding mortgages (CPIX) has now been above government's target range for four months, Statistics South Africa reported yesterday.

The consensus among economists polled by I-Net Bridge was that July's inflation data would show a slowdown to 6,2percent compared to prices in July last year. Few predicted that July's CPIX would worsen from the previous two months' 6,4percent.

"The data is very surprising - it's a shocker. I think the Reserve Bank will continue to be very concerned about it. We still expect the Reserve Bank to hike interest rates by another 50 basis points in October and this data reinforces our view," said JP Morgan economist Tebogo Dintwe.

The biggest contributor in the 1,1percent inflation increase from June to July was housing. This was probably caused by landlords hiking rents to take advantage of fewer people buying homes as a result of high prices and stricter lending rules introduced by the National Credit Act.

Fuel and power was the next biggest culprit for heating up inflation. July saw higher winter electricity prices after the National Energy Regulator allowed Eskom to increase its tariffs by 5,1percent.

Annual food inflation rose above 10 percent for the first time since May 2003.- With I-Net Bridge


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