CONSUMER inflation rose in line with expectations to 5.7% last month compared with December 2011, Statistics South Africa said on Wednesday, cementing forecasts that interest rates will remain on hold when the announcement is made on Thursday.
Consumer prices, as measured by the consumer price index (CPI), rose 5.7% year on year, slightly up from 5.6% year on year in November.
CPI was up 0.2% on the month mainly due to administered costs in housing and transport, such as higher rates and taxes, and an increase in long-distance bus fares, Statistics SA reported.
Frost & Sullivan economist Craig Parker said price pressures in December were not surprising.
"The slight uptick in inflation is to be expected given the seasonal factors in December but I expect it to come down in the next month or two," he said.
Data showed that the housing and utilities subindex of the CPI rose 0.5% between November and December, mainly due to a 0.8% increase in actual rentals for housing and a 0.7% increase in owners’ equivalent rent.
The transport index was up 0.3% between the two months mainly due to a 26.6% increase in long-distance bus fares.
Investec chief economist Annabel Bishop said "the rising cost of living in South Africa due to higher administered prices" — ranging from double-digit electricity and water tariff increases to higher rates and taxes — pushed up CPI.
"In turn‚ the higher administered prices pushed up rentals‚ as owners’ costs were passed on to tenants," she said.
Food also exerted some upward pressure on inflation last month.
The annual average CPI was 5.6% for 2012, from 5% in 2011 and 4.3% in 2010.
Standard Chartered economist Razia Khan said that although immediate pressure might dissipate in year-on-year terms, Standard forecast "a good chance" that inflation would breach the Reserve Bank’s 3%-6% target band around the middle of the year.
"Any breach of the inflation target will be temporary, modest and mostly driven by technical factors. With a substantial negative output gap, policy will remain accommodative for some time," Ms Khan said.
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