South African inflation slows to 5.8%

South Africa’s inflation rate fell to 5.8 percent in November, staying inside the central bank’s target band for a third month and giving it room to keep interest rates unchanged.
Inflation slowed from 5.9 percent in October, the Pretoria-based statistics office said on its website today. Last month’s inflation rate matched the median estimate of 22 economists surveyed by Bloomberg. Prices were unchanged in the month.
The price of Brent crude oil has dropped by about 40 percent since reaching a nine-month high on June 19, helping to contain inflation even as the rand weakened by more than 6 percent against the dollar in the same period. The Reserve Bank left its benchmark repurchase rate unchanged at 5.75 percent last month and cut its inflation forecasts.
The slowdown in inflation “could postpone the decision to raise interest rates,” Lullu Krugel, an economist at KPMG LLP, said by phone from Johannesburg today. “A further weakening in the rand could erode some of the positives from the lower oil price.”
Transport costs, which contribute 16 percent to the consumer price index, rose 4.2 percent in November, down from 4.8 percent in the previous month, the statistics office said. The government lowered gasoline prices by 3.3 percent in November.
Easing Inflation
Policy makers have room to adjust monetary policy gradually, the central bank said on Dec. 1. The bank is forecasting inflation will ease to an average of 5.3 percent next year.
Retail (SARSCONY) sales expanded 3.4 percent in October compared with a year ago, the fastest growth since January, according to a separate report from the statistics office today. Sales increased 0.4 percent in the month.
The rand fell 0.5 percent to 11.5065 per dollar as of 1:13 p.m. in Johannesburg. The yield on government bonds due in December 2026 rose nine basis points to 7.9 percent.
The core inflation rate, which excludes food, non-alcoholic beverages, gasoline and electricity costs, rose to 5.8 percent in November from 5.7 percent in the previous month.

Credit: Bloomberg