Price increases on food items may have reached its peak. That’s the word from analysts following the release of inflation figures on Wednesday.
The rand held onto gains against the dollar on Wednesday as data showed headline consumer inflation rose while retail sales growth slumped, bolstering expectations that an interest rate cut was unlikely in 2016.
Statistics South Africa (Stats SA) data showed headline consumer inflation quickened to 6.1% year-on-year in September from 5.9% in August, suggesting policymakers will keep the benchmark repo rate at 7% in November, maintaining attractively high returns for foreign investors.
BNP Paribas securities economist, Jeffrey Schultz says, “We have to acknowledge, however, the stark political risks which remain in the system which have the potential to derail the currency, and hence inflation and inflation expectations next year.”
Schultz added, “This is why we think that the bank will continue to communicate at its next meeting on 24 November that, at this stage, the bar for monetary easing remains high.” Consumer confidence is low on the back of weak economic prospects. South Africans are staying away from the shops feeling the impact of the tough economic conditions.
Retail sales slowed more than expected to 0.2% year on year indicating consumers are under tremendous pressure.
Consumer confidence is low on the back of weak economic prospects.
High levels of unemployment, high debt levels, higher inflation and interest rates are affecting consumers.
The main contributors to the 0.2% increase were general dealers and pharmaceuticals.
Consumers are staying away from durable goods like furniture. – Additional reporting by Reuter