SABC News - Consumer inflation expected to increase to nearly 6%:Monday 15 February 2016

Consumer inflation expected to increase to nearly 6%

Monday 15 February 2016 17:00

Dimakatso Leshoro

Food inflation is one of the factors that contributes to the increase in consumer inflation.

Food inflation is one of the factors that contributes to the increase in consumer inflation.(SABC)

Consumer inflation is expected to have edged higher to nearly 6% on Wednesday when Statistics South Africa releases the CPI figures for January. Inflation registered its fastest increase in one year in December, as higher food prices took hold due to the severe drought in the country.

Headline inflation jumped to 5.2 % year-on-year in December from 4.8% in November. The fast pace of acceleration is buoyed by food inflation. The Reserve Bank now expects food inflation to peak at around 11 % in the fourth quarter of this year.

January's CPI number is expected to come in steep at 5.9 % and possibly touch the bank's upper target of 6%.

Last month, the Reserve Bank upwardly revised its CPI projections for the year. It now expects inflation to remain above 6 % the next two years, averaging 6.8 % this year and 7 % in 2017.

Economist at Nedbank Isaac Matshekgo says a further 75 basis points hike over the year may be on the cards as the bank tries to stem inflation. This will not be good for economic growth.

Economist at ETM Analytics Jana Le Roux says the bank will also be looking at the rand which has stabilised following last month's interest rate hike.

Meanwhile, retail sales have remained resilient over the last few months, partly because of a relatively low inflation rate environment over the last year and increases in public sector wages but Le Roux says signs of slowing down will start showing.

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