CONSUMER Price Inflation rose by 3,4percent in October compared with September's 3,2percent, marking the ninth successive month that inflation has been within the three to six percent target band, Statistics SA revealed yesterday.
Inflation is a measure of the general price increase of goods and services.
Investec economist Kgotso Radira said this month's increase was due to an unexpected increase in the price of new motor vehicles.
"Compared with the same time last year, inflation was at 5,9percent year-on-year, this does not mean prices are falling. It means prices are still increasing but at a slower pace than a year ago," Radira said.
"The main positive from low inflation is that consumers buy more goods with the money they have than was the case a year ago."
Radira said the main drivers of this moderation in inflation over the past year had been the rand's strength against major currencies and food prices had also been moderating.
He said another important driver of low inflation had been the low levels of consumer spending.
"If consumers are not buying, retailers have no reason to increase prices. Instead they will lower prices to try to boost sales, which is what we see from the moderating inflation this year," said Radira.
"If the rand strengthens further and spending remains weak, this will likely push inflation lower than current levels and could keep it within the target band for 2011," he said.
Annabel Bishop, chief economist at Investec, simplified the CPI index: "It simply means that in October this year you paid 3,4percent more than you paid in October last year. It does not say anything to your Christmas prices," she said.
Based on the third quarter's slow GDP growth of 2,6percent, Radira said, "we believe there could still be another interest rate cut in the first quarter of 2011.
CPI pushed up by car prices
CONSUMER Price Inflation rose by 3,4percent in October compared with September's 3,2percent, marking the ninth successive month that inflation has been within the three to six percent target band, Statistics SA revealed yesterday.
Inflation is a measure of the general price increase of goods and services.
Investec economist Kgotso Radira said this month's increase was due to an unexpected increase in the price of new motor vehicles.
"Compared with the same time last year, inflation was at 5,9percent year-on-year, this does not mean prices are falling. It means prices are still increasing but at a slower pace than a year ago," Radira said.
"The main positive from low inflation is that consumers buy more goods with the money they have than was the case a year ago."
Radira said the main drivers of this moderation in inflation over the past year had been the rand's strength against major currencies and food prices had also been moderating.
He said another important driver of low inflation had been the low levels of consumer spending.
"If consumers are not buying, retailers have no reason to increase prices. Instead they will lower prices to try to boost sales, which is what we see from the moderating inflation this year," said Radira.
"If the rand strengthens further and spending remains weak, this will likely push inflation lower than current levels and could keep it within the target band for 2011," he said.
Annabel Bishop, chief economist at Investec, simplified the CPI index: "It simply means that in October this year you paid 3,4percent more than you paid in October last year. It does not say anything to your Christmas prices," she said.
Based on the third quarter's slow GDP growth of 2,6percent, Radira said, "we believe there could still be another interest rate cut in the first quarter of 2011.
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