South Africans lower their inflation expectations for 2017

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South Africans lower their inflation expectations for 2017

8:31 CAT | 25 Jan 2017

Average inflation expectations for 2017 declined from 6.0% in the third quarter to 5.8% in the fourth quarter‚ the Bureau for Economic Research (BER) said.

This is the first time since the third quarter of 2015 that average expectations are below 6%‚ it said. “During the fourth quarter‚ both analysts and business people revised their inflation expectations for 2017 downwards by 0.1 percentage point (% pt) relative to the third quarter‚ while trade unions reduced their forecast by 0.6% pts.

“However‚ one should take care when interpreting the results for trade unions and not attach too much value to a single data point. The results could fluctuate quite a bit between consecutive quarters given that the number of respondents is low and from time to time views differ widely‚” the BER cautioned.

“On average‚ respondents expect inflation to remain unchanged at 5.8% in 2018. While analysts expect inflation to moderate to 5.4%‚ trade unions foresee 5.9% and business people 6.0%.

“Average 5-year inflation expectations also edged marginally lower from 5.9% to 5.8%.”

Once again the survey respondents did not change their view on economic growth much. They still expect that it will accelerate from 0.6% in 2016 to 1.3% in 2017.

“Regarding the prime interest rate‚ the average view of the respondents was unchanged; they still expect a cut from the current 10.50% to 10.25% by the end of 2017.

“Very little changed in the salary and wage increase expectations of the three respondent groups combined. As in the third quarter‚ they still expect salaries to increase by 7.1% during 2016‚ and then by 7.2% in 2017 (7.3% previously)‚” the BER said.

Source: TMG Digital