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January CPI rises above expectations

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The Consumer Price Index (CPI) continued its upward trend, rising to 6.3% in January, Statistics South Africa (Stats SA) announced on Wednesday.

Market expectation was that it would rise to 6.2% from December’s 6.1%.

“On average, prices increased by 0.6% between December 2011 and January 2012,” said Stats SA.

According to Stats SA, the food and non-alcoholic beverages index increased by 1.5% between December and January, while the housing and utilities index also rose. Between December 2011 and January 2012, the miscellaneous goods and services index increased.

Standard Bank economists said despite the rise in inflation, its interest rate outlook remained unchanged.

“We reiterate our base case scenario that the Reserve Bank will likely keep interest rates on hold this year. The current environment, which can be characterised as “stagflation lite’, (where the weak domestic growth outlook coincides with rising inflationary pressures) gives the Reserve Bank less room to move policy rate,” said Standard Bank.

Inflation is expected to hover above the central bank’s upper 6% limit for much of the year.

“Inflation will stay elevated off the low base established early last year, mainly due to persistent pressure from rising food, fuel and administrative prices. A weaker rand is likely to add to the mix later in the year. These stresses will be partly offset by softer domestic spending and excess production capacity, which is likely to contain retailers’ pricing power and prevent the build-up of significant secondary inflationary effects,” said Nedbank. – BuaNews

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.