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The SA Daily 20 March 2018

February CPI due today

  

  • February inflation is due out today. Our 2018 forecast (5% average) is comfortably within the SARB’s 3-6% target range. Our forecasts account for three key risks, highlighted below (also see Growth setbacks; now Moody’s of 19 March, by Elna Moolman).
  • ) Food inflation: Per our rand forecasts, grain and poultry prices should be contained. While wheat imports are expected to rise due to the Western Cape drought, prices should remain at import parity. Further, maize production is expected to be less due to the drought but large carry-over stocks should keep prices at export parity. Lastly, fruit exports should be redirected to the domestic market (due to poor quality from the drought), thus helping to contain prices. —
  • 2) Electricity tariffs: Nersa announced a guided municipal electricity tariff increase of 6.8% for 2018, after the 5.2% approved for Eskom, of which its bulk tariffs to municipalities increased by 7.3%. This is still open for public comment, and individual municipalities can still apply for higher increases (electricity-related) if they can justify it.
  • 3) VAT and other taxes: There should be additional surveys in April of select items that will be affected by the VAT increase but that are not surveyed every month. Just over 40% of the CPI is not subject to VAT, and so will be unaffected.

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