Consumer inflation slows in June
28 July 2010
The Consumer Price Index (CPI) slowed to 4.2% in June, Statistics South Africa (Stats SA) said on Wednesday. This rate was 0.4 of a percentage point lower than the annual 4.6% rate recorded in May.
"However, on average, prices remained unchanged between May 2010 and June 2010," said Stats SA.
The figure came in lower than economists had predicted. While some predicted it would come in at 4.4%, others expected it would come in at 4.7% year-on-year.
"What we saw was a significant downward trend," Standard Bank economist Danelee van Dyk told BuaNews, adding that they had added "some elements" of World Cup pricing into their numbers. "But we are surprised that there is little evidence of this in the numbers."
Standard Bank said the figure should also have surprised the Reserve Bank, who at the repo rate meeting last week expected inflation in the third quarter to average 4.5%.
According to the data, the food and non-alcoholic beverages index decreased in June while the housing and utilities index increased due to an increase in rentals. The restaurants and hotels index increased by 4.3% due to an increase in accommodation.
"Three items whose prices were potentially sensitive to the World Cup were hotels, restaurants and airfares. Of the three, only hotels (excluding educational boarding fees) showed significant inflation in June, namely 17.6% month-on-month and 26 percent year-on-year.
"Restaurants increased by a modest 0.3% month-on month," said Stats SA, adding that it did not change its normal survey schedule to study the effect of the tournament.
Nedbank said inflation came in well below market expectations: "Over the month, the main upward pressure came from higher housing costs. Inflation is expected to pick up slightly, ending the year around 5% if stronger domestic demand enables retailers to regain some pricing power," the bank said.
"However, a strong rand and disinflation abroad will help to contain price pressure."
Source: BuaNews
