CPI rise makes rate cut unlikely

2010-11-25 00:00

THE Consumer Price Index (CPI) quickened to 3,4% last month from 3,2% in September, limiting the prospect of another interest rate cut early in the new year.

The consumer inflation figure was driven upward by higher vehicle, housing and utility costs.

CPI still remains firmly within the 3-6% target of the Reserve Bank’s Monetary Policy Committee.

Consumer inflation in Pietermaritzburg softened marginally, coming in at 3,9% from 4% in September 2010. CPI in Durban and Pinetown was 2,3% from 2% in September while KZN’s CPI was 2,6% from 2,5% in September 2010.

Food inflation has been relatively muted this year and the Rand’s strength will help to stem the food inflation tide,

However, Standard Bank economist Shireen Darmalingam warned that there is considerable upside risk in this area.

“Food constitutes 14,3% of the CPI basket and, with global food prices starting to increase, we caution that food inflation could cause a further rise in overall CPI. Abroad, the impact of higher food prices is already starting to cause consumer inflation to increase,” Darmalingam warned.

Inflation for food and non-alcoholic beverages in Pietermaritzburg was 0,8%, while Durban and Pinetown recorded food deflation of 0,1%.

Administered prices inflation remained unacceptably high, at 8,4%.

However, the overall inflation outlook for 2011 remains relatively benign, despite these areas of concern.

Retailers have not been able to hike prices significantly in recent months.

“Consumers remain price sensitive and as a result retailers continue to resort to discounting to move big-ticket items off their shelves. This trend is likely to continue over the coming months as uncertainty over the outlook for the domestic economy persists. Cost-push pressures, particularly from administered prices as well as wage inflation, will likely be one of the main sources of upward pressure in the medium term,” said Nedbank’s Group Economic Unit.

3,4% — national

2,6% — KZN

3,9% — PMB

2,3% — Durban

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