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Modest

28 July 2004 Angelo Coppola

(28.7.04) Strong Rand and Stable Inflation supports confidence in economy

June's modest 5.0% year-on-year increase in CPIX coupled with a consistently strong rand reinforces our confidence in the South African economy, says Tebogo Hlabioa, Economic Research Analyst at Metropolitan Asset Managers.

“This increase in CPIX was lower than the market's expectation of 5.4% and adds to lower inflation expectations.

Transport costs, which increased from 4.2% in May to 9.1% in June as a result of an erratic oil prices in the last few months, were the main drivers of this month's CPIX.


However, the June petrol price cut which will factor into the next CPIX numbers, should have positive spin offs to both consumer and producer inflation in the next few months.

We can expect a little bit of a spike from tomorrow's PPI numbers due to higher winter season electricity prices.


We do not expect this to be sustained going forward because of imported lower goods inflation and government's plans to quicken the pace in introducing competition to current monopolies such as Eskom and Telkom.

Overall, we remain sanguine in our view that interest rates will remain on hold this year. The June CPIX 5.0% year-on-year increase poses no threat to the current monetary policy stance.”

Quick Polls

QUESTION

Healthcare brokers have long complained about inflation-plus medical scheme contribution increases; but pandemic may have changed things. What will pandemic-induced changes in hospital utilisation do to medical scheme contribution increase patterns?

ANSWER

Below inflation increase for 2022, then back to inflation-plus
Long-term trend of below inflation increases
Inflation-linked hikes for 2022, then back to inflation-plus
This is a 2-year hiccup, inflation-plus increase trend remains in place
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