CPIX rises to its worst level in five years

Nicky Weimar, senior economist at Nedbank, says the CPIX figure was as expected

South Africa's Consumer inflation data (CPIX) - which excludes mortgage costs - for February rose to 9.4 % from 8.8 % the previous month, Statistics SA said today.

This is the first time in nearly five years that CPIX has come in at above 9%.

This is the 11th month running that CPIX has been above the SA Reserve Bank's (SARB) 6% upper target limit.

The data, however, is in line with expectations.

A Bloomberg survey put CPIX at 9.4 %, according to the median estimate of 12 economists. An I-Net Bridge survey found that CPIX was expected to surge to 9.4 % year-on-year in February.

Headline inflation - the percentage change in the consumer price index (CPI) - was 9.8 % for February, Stats SA said.

The SARB increased interest rates four times last year. However, this did not bring CPIX back within the 3% to 6% target range.

Inflation's woes
The rand's poor performance against the United States dollar, high oil prices and high food prices globally, as well as Eskom's proposed electricity price hike, have added to inflation's woes.

Fuel prices are expected to again rise next month and an 11 c/l hike in fuel levies, announced by Finance Minister Trevor Manuel in the Budget, takes effect in April.

Earlier today, SARB Governor Tito Mboweni told Parliament's finance committee economic conditions would get tougher before they got better, and further belt tightening was needed.

"After we take out food and energy, inflation is trending higher, we have to tighten our belts," he said. The central bank will make known its decision on interest rates on April 10.

Nicky Weimar, senior economist at Nedbank, says the CPIX figure was as expected.

"There were no surprises - but the general trend is alarming. We see CPIX increasing further and peaking perhaps next month.

"CPIX will ease - but it will remain high. Our economy is weakening,” she said.

Asked if the SARB would hike the repo rate next month, Weimar said: "It's the SARB's last chance to do so before the economy shows how much it is weakening, so there could be one last hawkish sound coming from the SARB."

However, she did not think a hike would be "the right thing to do. We're facing a tough year," Weimar said. - Sapa