June consumer inflation below expectation as rand’s slump fails to bite

Lisa Steyn

Consumer inflation for June was lower than expected, but analysts still expect a number of factors to push it beyond its upper band of 6%.

With a number of factors at play, the consumer price index (CPI) for June surprised on the low side, with the inflation rate at 5.5% year on year.


The CPI was lower than May’s 5.6%, but not as high as the market expectation of 5.7%.


The slowdown in June inflation is seen as unusual, not only because the rapid depreciation of the rand does not yet appear to have added any inflationary pressures, but because it is a heavy survey month where many CPI basket items, which are not surveyed every month, are considered.


For example, the price of public transport is a basket item which is not measured from month to month, but is measured in June and is influenced by the cost of petrol.


It has a weighting of 3.2% of the total basket. In June, public-transport prices rose by less than the increase recorded in June 2011.


According to Kamilla Kaplan of Investec Bank: “The decrease in the petrol price amounted to 8c per litre as a moderate strengthening in the rand, versus May levels, helped offset the increase in the oil price resulting in a lower rand price for oil.”


But Kaplan warned the relief would prove temporary as petrol prices increased by 84c a litre in July, to be followed by a further rise of about 32c a litre in August.


This was likely to push CPI up to 6% (year on year) in July and 6.4% in August.


Nedbank said that the downside surprise to its forecast of 5.8% inflation came from lower food prices, which increased by just 0.1% on the previous month, not 0.5% as expected.
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