CPI forecast at 5.4 percent for May

THE South African headline consumer price index (CPI) is forecast at 5.4 percent year-onyear in May, slightly higher than the 5.3 percent in April, according to several South African economists.

CPI slowed more than expected to 5.3 percent in April from 6.1 percent in March. But the South African Reserve Bank soon dashed any hopes the drop in inflation would trigger a rates cut. Governor, Lesetja Kganyago said last month, despite CPI falling within the Bank’s target of between 3 percent and 6 percent, the longer term CPI trajectory was “uncomfortably” close to the upper end of the target range.

In a note on Thursday, NKC African Economics senior economist Elize Kruger said a marginal increase in food prices as well as increases in petrol and diesel prices were expected to exert a moderate upward pressure on inflation, hence the forecasted 5.4 percent figure.

Kruger said, excluding food and non-alcoholic beverages, inflation was forecast to increase to 5.3 percent in May. She said CPI below 6 percent would provide comfort to the Reserve Bank that inflation was indeed behaving in line with expectations.

In a note on this week’s major economic data, Investec economist Kamilla Kaplan also forecast a 5.4 percent CPI inflation in May.

“In May, the petrol and diesel price hikes of 49c/litre and 30c/ litre will have increased the contribution of the fuel component to headline CPI.”