Inflation breaches bank’s target

Interest rate cut unlikely

HEADLINE inflation edged back above the upper end of the SA Reserve Bank’s target in September as retail sales growth slumped to a two year low, dimming market bets of an interest rate cut in November.

Data released by Statistics SA showed yesterday that consumer price index (CPI) inflation quickened to 6.1 percent year on year in September, up from the 5.9 percent recorded in August.

Stat SA said the continued slowdown in retail sales, from a peak of 4 percent growth in February, also revived fears that a second quarter expansion in domestic product could be short-lived.

Retail sales in August grew the slowest since a 0.9 percent contraction in June 2014, expanding 0.2 percent year on year in August, with sales of household goods showing the largest decline.

“With spending no longer propping up growth, Africa’s largest economy may be lucky to avoid gross domestic product flattening this year,” said Paul Sirani, the chief market analyst at Xtrade.

On a month-on-month basis, prices were up 0.2 percent after a 0.1 percent contraction previously.

The main drivers of the annual inflation were food and non-alcoholic beverages, housing and utilities and miscellaneous goods.

Food price inflation remained at 11.6 percent year on year, with processed food price inflation at 11.4 percent. The rand lost its early morning gains after the data was released, and traded 0.15 percent weaker. Latest data Christie Viljoen, a senior economist at KPMG Investment Management, said based on the latest price data and recent comments by the National Agricultural Marketing Council, it was possible that