CPI falls to 4.8% in April

[newsroom]

Pretoria- The Consumer Price Index (CPI) in April fell below market expectation at 4.8 percent year-on-year, Statistics South Africa (Stats SA) announced on Wednesday.

In March CPI fell to 5.1 percent. Market consensus was that CPI would fall to 5 percent in April.

According to Stats SA, on average prices increased by 0.2 percent with the food and non-alcoholic beverages index increasing while the household contents and services annual rate decreased among other things.

“Inflation fell below 5 percent for the first time since February 2007, due to lower prices of some durable and semi-durable goods as well as a further moderation in food inflation. Inflation will remain below the target band during the remainder of 2010, easing further in May. Thereafter, inflation is expected to pick up slightly during the remainder of 2010,” said Nedbank.

The bank noted that the rand’s recent weakness posed no immediate threat to the inflation outlook as the current bout of global risk aversion has also put downward pressure on commodity prices that includes oil.

“However, should the currency depreciate further and remain at weaker levels it could filter through into higher inflation, given the high imported component of the basket. Although the extent of the impact would ultimately depend on how strong domestic demand was and therefore how much pricing power retailers had,” it said.

Said Standard Bank:”While household’s spending appetite is expected to increase as the benefits from the degearing process feed through, inflationary pressures will remain subdued given the significant knock to the consumer base from all the job shedding.

“CPI inflation is expected to resume an upward trajectory towards year end. Limited price pressures during the year will see inflation end the year at around 5.1 percent.”

Both institutions do not expect the data to have any bearing on the Reserve Bank’s interest rate view going forward and maintain the view that the interest rates will remain unchanged for the remainder of this year. Currently the repo rate stands at 6.5 percent -BuaNews