PMB inflation highest

2008-07-30 00:00

CONSUMER inflation (CPI) in Pietermaritzburg during the month of June accelerated to 14,7%, the highest inflation rate of all major metropolitan and rural areas in the country.

Durban’s CPI, which includes interest rates on mortgage bonds, stood at 12,8% last month.

The main inflationary factors for Pietermaritzburg consumers are spiralling food prices (up 19% in June) and transport costs.

Nationally, CPIX — inflation excluding interest rates on mortgage bonds — was 11,6%, up from 10,9% in May.

National CPI or headline inflation in June came in at 12,2%. Rampant food inflation in Durban and Pinetown persisted, at 20% in June.

Although economists are divided over the issue, the latest inflation data, coupled with Tuesday’s higher than expected private sector credit extension growth figures, do not bode well for the short-term interest rates.

Credit extension growth in June 2008 was propped up mainly by corporate borrowing.

The SA Reserve Bank (Sarb) will announce its decision on interest rates on August 14. The bank’s target range for inflation is three to six percent.

However, a distant ray of hope may emerge in the form of August 2008 inflation data, set to be released at the end of September, as a result of a weakening oil price and the strengthening of the rand in recent weeks.

These two positive trends should result in lower fuel price inflation next month.

However, Standard Bank economist Danelee van Dyk said the Reserve Bank may not be convinced to keep monetary policy unchanged in August, due to the volatile nature of commodity prices.

“We are still confronted by stubbornly high food inflation — mostly in processed foods — and rising underlying inflationary pressures.

“In South Africa, the consumption per capita of dairy products (processed) has grown by 26% since 2003, outpacing growth in consumption of meat (unprocessed).

“Prices of grain products (processed), breakfast cereals, pasta, and biscuits have risen to … 33,8% year on year in June from 18,4% in January this year,” she said.

Van Dyk believes that South Africans can expect interest rates to p[eak on August 14.

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