TARGETED consumer inflation slowed in line with expectations to 5,9% year-on-year in October, returning to the target band for the first time in more than 2½ years, official data showed yesterday.

Statistics South Africa said annual headline CPI slowed from 6,1% in September while it was unchanged on a monthly basis compared with 0,4% the previous month.

A Reuters poll last week forecast CPI would slow to 5,9% ear-on-year and come in at 0,1% on a monthly basis.

Razia Khan, head of Africa research for Standard Chartered, said the consensus had been “spot-on”.

“Of course, the key consideration is how long it stays within the targeted range. The summer months in South Africa before Christmas typically see low month-on-month rises.

“ But the key test comes in the new year, with busy survey months, and new year repricing of everything.

“We also think the World Cup will be a major factor.

“ Sadly, every major international event has been followed by opportunistic price setting as South Africa tries to realign itself with the rest of the world. Hotel rooms are not a major part of the index, but it is the secondary impact we are wary of.”

Christie Viljoen of NKC Independent Economists, said “obviously it’s good news to be back in the target band, which is something the Reserve Bank aimed for with its higher lending rates in the past few years.

“It creates some optimism in terms of consumer spending. But we should be a bit wary that the annualised rate could climb towards year-end again due to base effects.

“We will see some high numbers in the coming months – inflation will climb higher next year because of the Eskom situation.”

Elna Moolman, economist at Barnard Jacobs Mellet, said the figure was “exactly in line with our forecast and we expect it to remain below 6% for November as well. Unfortunately that will be followed by a couple of months outside the target range, but we expect it to be within the target range from the second quarter.”

Freddie Mitchell, economist at Efficient Group, said the news was good. “But what remains of concern is the proposed 45% electricity tariff increase by Eskom

“We will see how long inflation will be maintained within the band.

“Consumer demand is depressed at the moment and there might be problems with inflation if consumer demand rises next year.” – Reuters