Picture: ISTOCK
Picture: ISTOCK

Average consumer price index (CPI) expectations for 2018 remained unchanged at 5.8% in the third quarter, a survey by the Bureau for Economic Research (BER) has established.

While analysts and businesspeople have lowered their forecasts, trade unions have revised their projections upwards since the previous survey. Analysts and businesspeople have revised their projections for all forecast years downwards since the previous survey.

According to the University of Stellenbosch’s BER, analysts expect inflation to moderate from 5.3% in 2017 to 5.0% in 2018, but then to accelerate to 5.3% in 2019 once more. Previously they forecasted 5.4%, 5.1% and 5.5% respectively.

In the third quarter, businesspeople expect inflation to be 6.1% in both 2017 and 2018. Previously they forecast 6.3% and 6.4%, respectively. businesspeople see inflation accelerating to 6.3% (down from 6.5% previously) in 2019.

Trade unions lowered their 2017 forecast from 6.0% to 5.8%, but increased their 2018 and 2019 projections both from 5.9% to 6.1% and 6.0%, respectively.

"All three social groups lowered their five-year inflation expectations: analysts from 5.5% to 5.4%, businesspeople from 6.3% to 6.0%, and trade unions from 5.8% to 5.5%," the BER said Thursday.

"Average five-year expectations declined from 5.9% to 5.6%, which is the lowest level since the third quarter of 2011 when it was surveyed for the first time.

In the third quarter, the survey respondents did not change their view on economic growth in 2017 and 2018 by much relative to the second quarter. They now expect growth to be 0.5% in 2017 and 1.0% in 2018, compared to 0.4% and 0.9% previously.

Following the reduction in the prime interest rate by 25 basis points in July, businesspeople and trade union officials also lowered their interest rate forecast by the same amount. In the second quarter, analysts already anticipated reductions of 50 basis points in 2017 and in the third quarter they saw no need to change their view.

In terms of salary and wage increases, in the third quarter all the social groups adjusted their forecasts slightly downwards relative to the second quarter. On average, they now expect wages to increase by between 6.1% and 6.4% in both 2017 and 2018. The only exception is the 2018 forecast of trade unions at 7%.

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