Consumer Price Index (CPI) eases in February

The Consumer Price Index (CPI) slowed to 6.1% in February, down from 6.3% in January, Statistics South Africa (Stats SA) said.

Bloomberg consensus was that inflation would tick-up to 6.4% year-on-year.

“On average, prices increased by 0.6% between January 2012 and February 2012,” said Stats SA on Thursday.

This increase was mainly due to a 6.4% monthly increase in medical services as well as a 34 cents hike in the petrol price. The price of several food items fell over the month.

Inflation is expected to hover over the Reserve Bank’s 6% limit for most of 2012, Nedbank economists said. It expected to get back into the target range of between 3% and 6% in 2013.

“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 growth in domestic spending and excess production capacity, which is likely to contain retailers' pricing power and prevent the build-up of significant secondary inflationary effects,” noted Nedbank.

Standard Bank economist Shireen Darmalingam in a research note said the Reserve Bank was likely to keep the repo rate unchanged at 5.5% this year, even though new concerns of the demand side pressures have emerged.

“We believe that the MPC members will monitor conditions even more closely. The current environment of weak domestic growth and relatively high inflation gives the Reserve Bank little room to move the policy rate,” she said.