It seems like there is no stopping the ever rising rate of inflation in South Africa. At this rate one wonders even if the likes of Usain Bolt would even be able to catch up with the rate the way it is going. The increase in South Africa’s consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank (SARB) for its inflation target, was up 13.0% year-on-year (y/y) in July from 11.6% y/y in June. This is the sixteenth month in a row that the CPIX has been outside the central bank’s target of having inflation being between 3 - 6%. Before the release of todays statistics, a survey carried out by I-Net Bridge had forecasted inflation to come in at 12.9%.

The question most of us will be asking now is, “Where to from here?” If the inflation rate continues to go up at this rate, the central bank is going to be forced to increase interest rates again. We were lucky the last time the MPC met and they decided not to change interest rates, but next time around we may not be so fortunate. It seems like unimaginable that the rate will drop down from 13% to the target of below 6%. If only the saying of ‘the higher you go, the harder you fall’ could hold with the rate of inflation, we would be happy. But as high as the rate is going, do not expect it to come down as fast. In that famous words of Tito Mboweni, “It is time to tighten up your belts!”

Today (Thursday 14 August), Reserve Bank governor, Tito Mboweni, announced that the Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has decided to keep the repo rate at 12%. “The MPC has considered recent economic developments and the outlook for inflation and has concluded that, notwithstanding certain risks to future inflation outcomes, the current monetary policy stance is appropriate,” Mboweni said. This news comes as a huge relief to many who had feared that interest rates could go up again. But one should not be overly happy as the MPC will continue to monitor the situation and if need be, they will rise interest rates as they see fit. Read the rest of this entry »

We could be in for a huge petrol price drop in September. It is thought that the price of petrol could come down by as much as R1 a litre and R1.60 for diesel. That is if the world oil prices remain low and the rand remains strong. We will only know for certain come the 3rd of September as fuel prices come into effect on the first Wednesday of every month. Whilst most consumers will be happy if the prices go down by that much, fuel stations owners will not be too happy with this news.

Fuel station owners who bought fuel at the more expensive price will sell it at a loss as of the day of the change. On top of this, motorists will wait for the lower price before they fill up their vehicles. What this means is that, fuel stations could keep their supplies low until the Tuesday (2 September), or they might even allow supply to run out. Oil companies will then struggle on the Wednesday to meet the demand. Now if fuel stations do not want to stock up before the Tuesday that means there could be a potential shortage of fuel being sold by the fuel stations. Read the rest of this entry »

It still is no surprise the sales of new vehicles in South Africa continue to drop. But from a manufacturers point of view, exports have gone up during this slump period in sales in the local industry. During July, Naamsa said that 28 269 new vehicles were exported. This represented an improvement of 13 022 vehicles compared to the 15 247 vehicles exported during July last year. With very few local car sales taking place due to the tough economic conditions manufacturers have been forced to export their vehicles which in the past were being consumed by the local demand.

In the local market, new vehicle sales would remain under severe pressure as a result of the cumulative impact of interest rate rises, inflationary pressures, high levels of personal debt and the slow down in economic activity. New vehicle sales in South Africa continued on their downward spiral in the month of July. It had been feared the the local car manufacturing industry would be hit hard by the lack of sales in the local market but judging by the figures released today, it goes to show that the manufacturers can still remain in business if they continue to export. Hopefully the South African economy will not remain where it currently is today, and as the situation gets better, people will again be able to afford to purchase new cars.

Finally, a bit of good news on the economy front. It has been a while since we have heard of the price of anything coming down. The retail price of petrol will decrease on average by 27c a litre next Wednesday (August 6), the department of minerals and energy announced on Friday. The decrease follows an increase last month of between 69 cents to 75 cents a litre to record levels of between R10.40 and R10.70. The price of petrol now drops to R10.40 a litre in Gauteng and to R10.10 in coastal areas. Diesel prices will also decrease next week but paraffin prices will increase.

The increase in paraffin prices has not been welcome by many as a lot of South Africans use paraffin daily for cooking and lighting. The majority of paraffin consumers are unable to afford a lot in these testing times and adding further pressure on them does not help one bit. Read the rest of this entry »

The chaos in the Zimbabwe economy took another turn today. Zimbabwe will redenominate the dollar by removing 10 zeros from August 1, central bank Governor Gideon Gono said today (30 July). The Zimbabwe dollar will be redenominated by a factor of one to 10, which means they are removing ten zeros from the monetary value. This means that Ten billion (Zimbabwean) dollars today will be reduced to one dollar with effect from August 1. The new currency will co-circulate together with the family of bearer cheques … which shall cease to be legal tender on the 31st of December 2008. Read the rest of this entry »

South Africa’s targeted inflation - the Consumer Price Index excluding interest rates on mortgage bonds (CPIX) has risen to a new five-year high of 11.6% year on year in June from 10.9% year on year in May, Statistics South Africa said today (30 July). The surge is attributed to rising international oil prices and soring food costs. The higher than expected figure could put pressure on the Reserve Bank to raise interest rates yet again next month. This is the fifteenth month running that CPIX has been above the 6% upper target limit set by the Central Bank. Read the rest of this entry »