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The SA Daily 19 September 2018

Inflation today

  • Today we see the August consumer price inflation (CPI) numbers which we expect to come in at 5.1% y/y, slightly below Bloomberg consensus expectations of 5.2% y/y and flat from July.
  • A key risk to this forecast is food inflation, with generally weak price pressure that is echoed by the food retailers. The medium-term food inflation forecasts, which we expect to gradually drift upwards, will to a large extent depend on the behaviour of the rand. We pencil in a material rand exchange rate recovery to R14.30/$ towards year-end, as we expect the current overshoot to fade.
  • Looking ahead, food inflation could ultimately spike as there is a material risk of a renewed El Niño weather pattern towards year-end, which would leave SA susceptible to a drought, according to weather experts. However, sizeable maize stocks should help to alleviate the impact on local maize prices, depending on how severely a drought. There should be more certainty about the probability of this occurrence in the next week or two (see our report SARB; Moody’s; fiscal stall, of 17 September by Elna Moolman).

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