BIG CONTRIBUTORS to inflation are still fuel and food, according to the Standard Bank's analysis of the consumer price index (CPI) for July.
These supply-side factors - the 20c/litre fuel price increase, and the higher average cost of food in July 2000 compared with the same month last year - were two main reasons for the steep rise in headline inflation in July, and are the biggest contributors to annual inflationary pressure, said the report.
The headline index, it added, rose by 0,9% month-on-month (m/m) in July compared with 0,6% m/m in June. Increases in the monthly prices for housing (2,1%) transport (2,2%) and fuel and power (3,8%) contributed to the monthly rise in inflation.
The core index rose by 0,9% m/m in July compared with 0,7% m/m during June. Price increases in the indices for transport (0,4%), housing (0,4%), fuel and power (0,1%) and household operation (0,1%) were the main contributory categories.
On an annual basis, headline CPI grew by 5,9% in July - after increasing by 5,1% in both May and June. The average growth rate of inflation for the year to date stands at 4,1% - and Standard expects it to reach an average of 5,4% for the entire year.
Food prices will have an increasingly diminishing impact on inflation in the coming months, said the report.
Fuel prices... will begin to fade out of the index if the price of petrol falls or rises at a slower pace. The likelihood of the latter is high, as the average fuel over/(under) recovery for the period from July 26 to August 11 suggests that the next petrol price hike will be in the region of 3,3c/l. This is significantly lower than in the past months and will have a lesser impact on inflation.
As world oil supplies increase and the effect
of past oil production increases become more pronounced in the coming months, the cost of oil should decline.
This will reduce energy and fuel costs and have a benign impact on the CPI and PPI (producer price index) later in the year.
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