ECONOMIC WEEK AHEAD: Stats SA to release the last CPI data before VAT hike hit
Consumer-related data set for release this week will be among the last sets of economic data measured before April’s VAT increase takes hold.
On Wednesday, consumer inflation figures for March and retail sales figures for February will both be released by Statistics SA.
This inflation print will be the last consumer price index (CPI) reading before the implementation of the one percentage point increase in the VAT rate, from 14% to 15%, and the hike in the fuel levy.
"While we don’t anticipate an immediate or outsized inflationary response to the VAT increase, the March reading is likely to be the trough of the current inflation cycle," FNB chief economist Mamello Matikinca said.
NKC economist Elize Kruger said the risk to inflation for March was on the downside, with inflation expectations of 4.0%. "All of this will confirm that the underlying trend in inflation is moderate and should endorse the decision made by the Reserve Bank’s monetary policy committee to cut the repo rate by 25 basis points at the end of March."
Despite this, Kruger warned that April would come with a notable spike in the headline CPI figure.
The Bank said last week that it would prefer to see inflation anchored closer to the midpoint of the inflation target band at 4.5% and said the monetary policy committee was not embarking on a cutting cycle.
Many economists agree that this suggests it is unlikely there will be any more repo rate cuts in 2018, with the repo rate expected to remain steady until the end of 2019.
Meanwhile, retail sales started 2018 on a strong footing. Economists expect only a slight moderation in the February number given the 1.1% year-on-year contraction in February 2017, which was off a low base.
"Despite the impact of higher taxes, 2018 nevertheless looks set to be a better year for the retail sector as real disposable income remains robust; inflation, while forecast to increase, remains relatively benign; and credit growth accelerates," said Matikinca.
Improved confidence and low inflation were likely to sustain the retail sector in February, Kruger said, She expected retail sales to have moderated to 2.6% year on year.
Investec economist Lara Hodes said while consumer sentiment had improved, consumers remained constrained. "Credit extension to households, although improved, remains tight, with growth in unsecured lending averaging 3.0% year on year since February 2017.
"Added to this are high unemployment rates."
The International Monetary Fund (IMF) will host its spring meetings in Washington this week. According to the IMF’s economic outlook released in January, SA’s GDP will grow by 0.9% over the next two years, down from its earlier forecasts of 1.1% in 2018 and 1.6% in 2019.
Other data expected on Thursday include February’s civil cases for debt, wholesale trade sales, motor trade sales and building statistics.