CPI data for November likely to show a continued uptick

11 December 2016 - 15:58 By TMG Digital
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This week is a relatively busy one on the economic front‚ with data likely to show a continued uptick in consumer inflation in November‚ economists say.

Investec economist Kamilla Kaplan forecasts CP inflation to have lifted to 6.5% year on year (y/y) in November from 6.4% in October‚ with food price inflation expected to remain the key contributor to the headline CPI inflation outcome.

“Food prices are expected to peak in the fourth quarter of 2016 and to moderate into 2017‚ on the high statistical base factors established earlier this year‚ as well as on more favourable weather conditions that have improved the outlook for the 2017 maize harvest‚” she opines.

FNB economist Mamello Matikinca expects inflation to have risen to 6.7% year on year in November. She concurs that high food prices are expected to have been one of the main drivers behind the acceleration in headline inflation‚ but adds that a notable jump in transport costs - with petrol prices increasing by 45c/l in November - was also a major contributor.

However‚ she believes that Producer Price Inflation‚ also out this week‚ should show signs of a moderation in inflationary pressures. Increased expenditure ahead of the festive season‚ aided by large Black Friday volumes‚ should have bolstered consumer spending‚ she says.

According to Kaplan‚ PPI inflation is expected to have lifted to 6.8% y/y in November from a previous 6.6% y/y.

“Advance indications provided by the manufacturing PMI survey signalled an increase in cost pressures mainly on account of the petrol and diesel price increase in November‚ of 45c/litre and 63c/litre respectively‚” Kaplan notes.

Also due for release this week are retail sales growth for October‚ which Kaplan says are forecast to remain weak at 1.0% y/y versus 1.4% y/y in September.

“The BER Retail Survey indicates that retail sales growth will remain subdued in the 2016 fourth quarter period‚ with two-thirds of respondents reporting being dissatisfied with prevailing business conditions‚” she notes.

Matikinca is also not expecting an exaggerated jump in retail sales. She points out that high inflation‚ weak confidence‚ employment and household credit demand should keep retail sales growth within the low single digits.

She adds that the inability of the economy to create jobs should be further highlighted in the Quarterly Employment Survey‚ which is also due for release this week.

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