The SA Daily
23 May 2018
April CPI likely up
- April CPI is due out today. We expect a jump in inflation to 4.9% y/y for April, after the seven-year low of 3.8% y/y in March, due to the VAT increase from 14% to 15% in April.
- Around 56.5% of the CPI basket is subject to VAT, including around 5.5% of food items. Stats SA will be making adjustments to the overall CPI basket for April’s CPI to incorporate the VAT hike, even for items that are subject to VAT and are not surveyed every month. Automatic adjustments will also be made to municipal tariffs that are subject to VAT.
- Our 4.9% y/y April forecast is above the Bloomberg consensus of 4.7% y/y. We acknowledge some forecast risk because we have assumed full pass-through of the VAT rate hike to consumers, in line with international research (see EM pressure underpins MPC call of 21 May, by Elna Moolman).
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