Bloomberg News

South African Inflation Accelerates, Retail Sales Gain

October 19, 2011

(Updates with comment from economist in fourth paragraph.)

Oct. 19 (Bloomberg) -- South Africa’s inflation accelerated last month, while retail sales expanded more than economists’ forecast in August, adding to expectations the central bank will keep interest rates unchanged.

Consumer prices rose 5.7 percent in September from 5.3 percent in the previous month as higher fuel prices and a weaker currency boosted costs, the Pretoria-based statistics office said today on its website. Retail sales grew 7.1 percent in August from a year earlier, more than the 5.2 median estimate in a Bloomberg survey.

The rand has plunged 16 percent against the dollar since the beginning of August, adding to import costs as the central bank aims to support an economic recovery by keeping its key interest rate at a 30-year low of 5.5 percent. A recovery in consumer demand may give the Reserve Bank room to keep the rate unchanged on Nov. 10 after lowering it three times in 2010.

“The Reserve Bank will find comfort in today’s retail sales, pointing to the fact that the retail sector is not suggesting rates are too restrictive,” Gina Schoeman, an economist with Absa Bank Ltd. in Johannesburg said in a telephone interview. “They will keep rates on hold for longer. There is nothing in consumption data that is begging for a rate cut.”

‘No Evidence’

The central bank has forecast inflation will breach the top end of its 3 percent to 6 percent target range in the fourth quarter. There is “no evidence” that inflation pressures are becoming entrenched, Deputy Governor Daniel Mminele said yesterday.

“Inflation is moving up for all the reasons we know, predominantly administered prices and the weakness of the rand,” Colen Garrow, an economist at Brait SA, said in a telephone interview from Johannesburg today. “I don’t think it changes the monetary policy stance of the Reserve Bank. It’s probably becoming more concerned about the economy slowing down.”

The rand rose 0.4 percent to 7.9669 against the dollar at 1:37 p.m. in Johannesburg. The yield on the R157 government bond due in 2015 fell 7 basis points, or 0.07 percentage point, to 6.73 percent today.

Pick n Pay Stores Ltd., South Africa’s second-largest grocer, said today first-half sales exceeded the 3 percent increased posted by the local retail industry and accelerated since the beginning of August.

“Growth in the past six weeks has been above what we’ve seen in the previous six months,” Chief Executive Office Nick Badminton said. “I am pretty confident our second half will be better than the first.”

South Africa’s economy expanded an annualized 1.3 percent in the second quarter, the slowest pace in almost two years, as manufacturing and mining output plunged.

--Editors: Nasreen Seria, Gordon Bell

To contact the reporter on this story: Andres R. Martinez in Johannesburg at amartinez28@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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