SUBDUED SA June inflation data released last week offer little insight into current price changes, reflecting instead the likely trend in prices had the tidal wave of negative emerging market sentiment not damaged the currency and economy in the past two months.Both consumer and producer inflation came in well below expectations but analysts say the figures are likely to turn nasty in the next few months as the full effect of rand weakness and interest rate hikes of six percentage points filter through.
The Central Statistical Service (CSS) said consumer price inflation in June rose 0.3% from May and 5.2% from a year ago, below market expectations of a 5.4% year-on-year rise. Core inflation of 7.4% was also below expectations.
The all-commodities producer price index rose 0.3% in June from May, giving a year-on-year rise of 2.8% after May's 2.4% rise.
Market expectations had been for a rise of over 3%.
Analysts say both CPI and PPI are likely to kick higher from July's data.
Consumer inflation is expected to end the year at about 9%, leaving an average for 1998 of about 6.5%.
Producer inflation should average between 5% and 6%.
While inflation data managed a downside surprise in June, money supply growth was equally surprising on the upside.
The figures showed money supply growth of 19.39% year-on-year against 16.10% in May. Private sector credit extension growth dipped to 15.90% from 16.36%.
Some analysts say the high M3 figure points to complicity by local banks in the speculative attack on the rand, which has seen the currency lose up to a quarter of its value since May 22.
But the money supply numbers are unlikely to play a big part in monetary policy decisions unless an expected reversal in the M3 number does not come through in the next two months.
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