Picture: 123RF/LEON SWART
Picture: 123RF/LEON SWART

Inflation slowed to its lowest level in almost 16 years during May, as SA began to ease restrictions on the economy, moving into level 4 of the Covid-19 lockdown, when more goods and services became available.

Consumer inflation, measured by the consumer price index (CPI), slowed to 2.1%, its lowest level since September 2004, Stats SA data showed on Wednesday.

The fall was driven largely by fuel prices, the agency said, with its fuel index now 25.9% lower than it was in May 2019.

On a month-on-month basis, inflation fell 0.6%.

Inflation has now breached the lower end of the SA Reserve Bank’s 3%-6% target range, while remaining at or below the 4.5% midpoint of the range for 18 consecutive months.

In the face of the unprecedented shock the coronavirus has inflicted on the economy, the Bank has slashed the repo rate to record lows of 3.75% in 2020 to bring relief to households and businesses.

It has also taken several steps to ease liquidity pressure in local markets including buying government bonds in the secondary market, upping its holdings by R35.9bn by the end of June.

Due to the lockdown Stats SA has been unable to collect all price data used to calculate the CPI basket. For both April and May it has had to impute the prices for certain items to calculate CPI. In a note ahead of the CPI release, the agency said the prices of goods making up 23.7% of the basket were given this treatment.

donnellyl@businesslive.co.za

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