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South Africa: Rand Firms as Inflation Drops and Retail Sales Rise

South Africa: Rand Firms as Inflation Drops and Retail Sales Rise

Kara Dailey, Contributor

Talking Points:

  • Inflation dropped to 3.9% (y/y) in February 2015
  • Retail Sales increased by 1.7% (y/y) in January 2015

As the US dollar continues its upward trek, the South African Reserve Bank will carry on its quest to stave off imported inflation and support the rand. Perhaps lightening their task, consumer prices sharply dropped in February, while retail sales flourished in January.

Remaining within the SARB’s targeted 3-5 percent range, headline inflation dropped to 3.9% in February. The indicator fell 0.5 percentage points lower than the figure reported in January—4.4%. Categorically, the food and non-alcoholic beverages (0.4%) and alcoholic beverages and tobacco (1.0%) indices increased while the transport (-2.5%) index decreased. Geographically, inflation was lowest in KwaZulu-Natal (3.7%) and highest in Western Cape (4.5%).

An increase in retail sales may offer additional encouragement to a country in which economic growth is expected to slow in the first quarter. Year-over-year, sales increased by 1.7% due to an upturn in the textiles/clothing and footwear category (8.8%) as well as the hardware/paint and glass (6.4%) group. Month-over-month, sales decreased by 0.1% as household furniture/appliances and equipment fell by 4.5%. However, when added to the prior 2 months retail sales for the quarter increased by 0.6%.

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