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Inflation surprises on downside despite April VAT hike Featured

Written by  Jun 20, 2018
Inflation eased to 4.4% for May compared to 4.5% in April, despite the implementation of a VAT hike implemented in April.
 
This is according to Statistics South Africa (StatsSA), which on Wednesday released the consumer price index figures for May. The index increased 0.2% month-on-month.
 
The market consensus was for CPI to accelerate to 4.6%, and in a market update on Wednesday RMB economist Isaah Mhlanga had projected an increase to 4.8% having considered the VAT pass-through.
 
Mhlanga also expected the fuel price and weak rand to impact inflation. “The oil price and a weak rand have had a huge impact (on inflation), but the second-round effects will only be visible in the months to come and they are difficult to quantify and separate from the first-round effects,” said Mhlanga.
 
He expects the current account deficit data due on Thursday to be a “shock to the currency”, RMB projects it to be 5% of GDP.
 
By 10:23 the rand was trading 0.44% firmer from the previous close at R13.68/$. 
 
Contributors to May's inflation include food and non-alcoholic beverages which increased 3.4% year-on-year. Inflation for restaurants and hotels increased by 5% year-on-year.
 
Transport contributed to the month-on-month inflation, the index increased 1.2%.
 
In May the CPI for goods increased by 3.5% year-on-year, unchanged from April. The CPI for services increased by 5.3% year-on-year, also unchanged from April
 
South: Fin24

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