Consumer inflation moderates as expected in April

The case for the Reserve Bank to stay its hand on interest rates was boosted on Wednesday‚ when data showed consumer inflation slowed as expected in April.

Statistics SA said the consumer price index (CPI) rose 6.2% year on year in April‚ slowing from 6.3% in March and 7% in February.

The consensus forecast was for CPI to rise 6.2%. Nomura economist Peter Attard Montalto’s CPI forecast was above the consensus at 6.4%‚ and he estimates the chance of the Reserve Bank’s repo rate rising from 7% to 7.25% is 45%. Investec economist Kamilla Kaplan‚ on the other hand‚ had put CPI at a below-consensus 6.1%.

"Contributing to this expected moderation will be the lower petrol price increase in April‚ of 88c a litre versus the 162c increase in April 2015‚" she wrote her weekly economics report on Friday. Most economists are expecting the Reserve Bank to pause in its rate-increasing cycle when it announces the decision of its monetary policy committee meeting on Thursday. The Bank has raised rates by 75 basis points this year.

Although consumer inflation is still outside the Bank’s 3%-6% target‚ the moderating trend of recent months‚ combined with a more stable currency and slow economic growth‚ argue in favour of the Bank keeping rates unchanged.

Stats SA data released earlier this month showed mining production fell by a record 18% year on year in March‚ accelerating from a 8.3% fall in February.

Output in the manufacturing sector‚ which contributes 12.5% of SA’s gross domestic product (GDP)‚ contracted a much more modest 2% in March‚ after a 1.9% rise in February.

GDP growth in the fourth quarter of 2015 was 0.6% compared with both the previous quarter and the year-earlier quarter‚ Stats SA’s most recent data showed. Year-on-year growth slowed in every quarter of last year‚ from 2.2% in the first quarter‚ to 1.3% in the second‚ 1% in the third and 0.6% in the final quarter.

 – TMG Digital/BDlive