Inflation speeds up to 3.2% in March
CPI undershoots estimates and stays below midpoint of Bank’s target
Inflation accelerated in March on an annual basis but stayed well below the midpoint of the Reserve Bank’s 3%-6% target band, leaving more scope for policymakers to keep rates lower for longer to shore up SA’s pandemic-hit economy. Consumer inflation quickened to 3.2% in March on an annual basis, up from 2.9% the previous month, according to Stats SA. Even so, that was below the 3.3% median estimate in a Bloomberg survey.
Inflation accelerated in March on an annual basis but stayed well below the midpoint of the Reserve Bank’s 3%-6% target band, leaving more scope for policymakers to keep rates lower for longer to shore up SA’s pandemic-hit economy.
Consumer price inflation quickened to 3.2% in March on an annual basis, up from 2.9% the previous month, according to Stats SA on Wednesday. Even so, that was below the 3.3% median estimate in a Bloomberg survey of 15 forecasts conducted before the data was released. The consumer price index (CPI) increased 0.7% month on month in March.
“A low base in the second quarter of 2020 coupled with sharply higher energy costs could well see [consumer] inflation sustaining its upward trend, possibly even reaching 5% in coming months,” said RMB chief economist Ettienne le Roux. “There is little reason for alarm, however. Beyond a likely shortlived acceleration, the mediumterm outlook for CPI inflation remains encouraging.”
Consumer inflation has now stayed below the 4.5% midpoint of the Bank’s target band for 13 consecutive months, making it more likely that the central bank will keep its repo rate at a fivedecade low of 3.5% to stimulate the economy.
Bank governor Lesetja Kganyago said in March that policymakers are likely to maintain an accommodative monetary policy stance for as long as inflation remains contained.
RMB says underlying inflationary pressures in SA’s economy should remain subdued, with the CPI expected to average 4.1% in 2021 and 4.3% in 2022.
The Bank’s monetary policy committee has cut its benchmark interest rate by three percentage points since the start of 2020, with 275 basis points of cuts occurring between March and July 2020 in direct response to the Covid-19 pandemic.
Nevertheless, the economy still contracted 7% in 2020, the biggest slump in 100 years as a series of socioeconomic lockdowns meant to curb the spread of the virus shuttered mines, factories and restaurants for months on end.
The main contributors to the 3.2% annual inflation rate were food and nonalcoholic beverages; housing and utilities; transport; and miscellaneous goods and services, Stats SA said.
Food and nonalcoholic beverages inflation quickened by 5.7% year on year and contributed one percentage point to the total CPI annual rate of 3.2%.
Housing and utilities inflation accelerated by 2.2% year on year, contributing 0.5 of a percentage point. Transport inflation advanced 3.8% year on year, and contributed 0.5 of a percentage point. Miscellaneous goods and services inflation accelerated 4% year on year, contributing 0.7 of a percentage point.
BEYOND A LIKELY SHORT-LIVED ACCELERATION, THE MEDIUM-TERM OUTLOOK FOR CPI INFLATION REMAINS ENCOURAGING