PPS Investments commentary on CPI for May 2019

Consumer price inflation (CPI) increased by 4.5% year-on-year in May 2019 and was slightly higher than the 4.4% year-on-year increase in the previous month. There were small changes to transport and the residual, in terms of year-on-year contributions. The latest increase marks the sixth consecutive month that year-on-year inflation was at or below the midpoint of the target band. Inflation last breached the top-end of the target band in March 2017.

Month-on-month inflation increased by 0.3%, compared to 0.6% in April. The contribution from transport for the month decreased from 0.4% in April to 0.1% in May. This has signalled a slowdown in month-on-month inflation after the 0.8% increase in February and March, and the 0.6% increase in April.

The ability of the South African Reserve Bank (SARB) to keep inflation in check has meant that the Reserve Bank Governor has come under further pressure to reduce interest rates. Following the recently reported disappointing GDP growth level and some questions around the mandate of the SARB, there may be an opportunity for the Governor to act decisively at a time when South African consumers need it most.