Inflation and consumer spending take centre stage this week, as Stats SA publishes May’s consumer price index (CPI) on Wednesday, and April’s retail sales data on Thursday.
Independent economist Elize Kruger said she expected headline inflation to remain steady at 2.8% year on year, supported by deflation in fuel prices but slightly offset by higher meat and food prices.
“Due to the outbreak of foot-and-mouth disease among cattle at abattoirs there is now a short supply of meat resulting in higher meat prices on wholesale level, to be passed through to consumer level,” she said, though she emphasised that May remained a low survey month with minimal price changes outside food and fuel.
She expected food price inflation for May to increase to 3.9% year on year, compared with 3.3% in April, while Nedbank economists projected 4.2%.
“Lower fuel prices in May will offset some of the upward pressure stemming from higher food prices,” she said.
Economists from the Bureau for Economic Research (BER), Investec and Nedbank all expected CPI to remain comfortably below the 4.5% midpoint of the SA Reserve Bank’s inflation target.
Forecasts ranged from 2.3% (Nedbank) to 2.9% (BER and Investec), with core inflation expected to hover about 2.9%-3.2%.
“[Inflation] is, however, set to move above 3% during the remainder of the year,” said Lisette IJssel de Schepper of the BER.
Wednesday will also see the release of April’s retail trade sales, followed by wholesale and motor trade data on Thursday.
Investec economist Lara Hodes forecast retail sales to have grown by 3.3% year on year, supported by base effects and lower inflation. But she warned the outlook was “precarious”, with retailer confidence in contractionary territory and persistently weak consumer sentiment.
“After fairly upbeat manufacturing and mining data published [last week] it will be interesting to see how domestic trade dynamics played out in April to get some initial sense of quarterly GDP growth in the second quarter,” IJssel de Schepper said.
Nedbank saw a more modest 1.7% year-on-year growth in retail sales, driven by lower debt service costs and marginally improved real incomes.
Internationally, attention shifts to the US Federal Reserve and Bank of England’s interest rate decisions, with both expected to hold policy rates steady despite softer inflation data.
This week will also see several high-level international engagements, including SA’s participation in the Group of Seven summit in Canada and Nato meetings in the Netherlands, where global geopolitical tensions and defence spending commitments are expected to dominate the agenda.
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