The increase in South Africa's consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank (SARB) for its inflation target, was up 13.6 percent year-on-year in August from 13.0 percent year-on-year in July, Statistics South Africa (Stats SA) said on Tuesday. CPIX was expected at 13.2 percent, an I-Net Bridge survey found, with forecasts ranging from 12.9 percent to 13.8 percent and from just 6.3 percent a year ago.

Headline consumer prices — the 12-month rate of change in the consumer price index (CPI) for metropolitan areas — was up 13.7 from 13.4 percent year-on-year in August from a 13.4 percent year-on-year increase in July. Headline CPI was expected to have increased by a whopping 13.6 percent from just 6.7 percent a year ago.

Forecasts for CPI ranged from 13.2 percent to 14.1 percent.

The core inflation rate, which excludes volatile foods, municipal rates and monetary policy changes, was up 14.3 percent year-on-year in July from 13.7 percent year-on-year in July.

Carmen Altenkirch, Nedbank:

"I must admit it's much higher than what the market had expected. It still reflects rising food prices and electricity price increases from municipalities.

"In the short term, we expect CPIX to ease due to base factors such as the decline in fuel prices and the new methodology from next year should help matters."

Mike Schussler, T-Sec:

"We were expecting a slightly higher number. What the figures show us is that the inflation monster is not yet behind us. People who think this inflation number will fall like a stone are gravely mistaken.

"We have got to start realising that the inflation rate is not going to come down as quickly as we thought it would. The number will not be good for bonds, for the JSE and at the end of the day, the rand."

Dawie Roodt, Efficient:

"This is a bad one. It is worse than expected. I don't think the Reserve Bank will change anything yet, it doesn't mean there will be another rate increase.

"The figures show that there are still inflationary pressures in the market and these are strong."

Annabel Bishop, Investec:

"Today's record high CPIX inflation figure was chiefly driven by rising food prices, but there was significant evidence of unexpected broad based price pressures as well. Indeed, this is the first month in which such a substantial number of additional cost pressures have been evident and does not bode well for the 2008 inflation rate outlook.

"Normally such a deterioration in the inflation figure and outlook would signal an increased likelihood of another interest rate hike this year. However, Statistics SA said next year's re-weighting exercise will result in a significantly lower level of consumer inflation. Coupled with the continued severe weakness in retail activity and fall in household debt ratio, we expect no more interest rate hikes this year and a 50bp easing at the April 2009 MPC meeting."

I-Net Bridge