Inflation: PMB still higher than average

2008-05-28 00:00

THE latest consumer inflation rate released yesterday, which came in markedly above expectations, almost certainly means that the SA Reserve Bank will raise interest rates when its monetary policy committee meets during the second week of next month.

The national CPIX came in at a painful 10,4% in April — 0,3% higher than the March 2008 figure.

Headline inflation reached 11,1% last month. Local businesses and residents may feel further aggrieved as Pietermaritzburg’s headline inflation (CPI) came in at a shocking 13%, almost two percent higher than the national figure and higher than any other metropolitan area.

Pietermaritzburg continues to experience above-average inflation. Food inflation in the city grew to 16,6% in April.

Headline inflation in Durban and Pinetown came in at 11,9% in April and this area recorded a disturbingly high food inflation rate of 19%.

On a national level, three areas warrant major cause for concern.

Food inflation rocketed to 15,7% in April, while the CPI for “household operation” increased to 12,5%, a 5,3% month-on-month increase.

CPI for housing and transport also increased substantially last month.

The latest inflation numbers come hot on the heels of even more depressing gross domestic product (GDP) economic growth figures released on Tuesday, which revealed that SA’s first-quarter growth came in at 2,1%, a six-and-a-half year low.

This has prompted concern among experts, who fear that South Africa is moving into a period of “stagflation”, a term essentially referring to a period of high inflation coupled with sluggish economic growth.

Sanlam investment management economist, Arthur Kamp, noted that the SA Reserve Bank will look to control inflation expectations and wage demands going forward.

Doret Els, economist at the Efficient Group, warned that the latest inflation figures will influence subsequent wage demands.

“Wage demands for the first quarter 2008 averaged around 7,8%, already higher than the 2007 average of 7,3%. Moreover, SA’s manufacturing production capacity is at 86,2% [2007 average] … showing pressure on capacity utilisation and increasing the risk of higher input costs being passed on to the consumer,” she said.

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