CPI drop is more than expected

The Consumer Price Index (CPI) in June slowed to 4.2 percent, Statistics South Africa (Stats SA) says.

This rate was 0.4 of a percentage point lower than the annual 4.6 percent rate recorded in May. "However, on average, prices remained unchanged between May 2010 and June 2010," said Stats SA.

The figure came in lower than what economists had predicted. While some predicted it would come in at 4.4 percent, others expected it would come in at 4.7 percent year-on-year.

"What we saw was a significant downward trend," Standard Bank economist Danelee van Dyk told BuaNews, adding that they had added in "some elements" of World Cup pricing in their numbers. "But we are surprised that there is little evidence of this in the numbers."

Standard Bank said the figure should also have surprised the Reserve Bank, who at the repo rate meeting last week expected inflation in the third quarter to average 4.5 percent.

According to the data, the food and non-alcoholic beverages index decreased in June while the housing and utilities index increased due to an increase in rentals. The restaurants and hotels index increased by 4.3 percent due to an increase in accommodation.

Nedbank said inflation came in well below market expectations." Over the month, the main upward pressure came from higher housing costs. Inflation is expected to pick up slightly, ending the year around 5 percent if stronger domestic demand enables retailers to regain some pricing power. However, a strong rand and disinflation abroad will help to contain price pressure," it said. - BuaNews