South Africa's annual inflation weakened faster than expected and hit a fourteen-month low in in July, adding to speculation that the central bank may reduce interest rates further to support economic growth.
Inflation slowed to 4.9 percent in July from 5.5 percent in June, data from Statistics South Africa showed Wednesday. Economists had forecast inflation to slow to 5.2 percent. The latest figure was the lowest since May 2011, when consumer prices rose 4.6 percent.
Food prices moved up at a slower rate of 5.4 percent during the month, while housing costs and utility prices advanced 5.7 percent. Transportation costs were higher by 4.6 percent compared to last year, and clothing and footwear prices by 3.6 percent.
Compared to June, the consumer price index edged up 0.3 percent in July, slower than the 0.6 percent gain economists expected.
The South African Reserve Bank last month reduced its interest rate for the first time in one-and-a-half year in a surprise move, citing increased downside risks to the economy from the global economic slowdown. The bank also lowered its inflation outlook for this year and the next, and forecast inflation to remain within the target range over the period.
The bank said it expects inflation to moderate over the next few quarters, and to reach a low of 4.9 percent in the second quarter of 2013. Thereafter, it is expected to remain fairly stable around the 5-percent level to the end of 2014. Inflation is estimated to average 5.6 percent in the whole of 2012, and 5.1 percent in both 2013 and 2014.
Core inflation is seen reaching 5.4 percent in the fourth quarter of this year and in the first quarter of 2013, before declining and averaging 4.8 percent in 2014.
The central bank said the South African economy is expected to expand at a slower rate of 2.7 percent this year than 2.9 percent estimated earlier, due to the impact of adverse global developments and deteriorating sentiment at home. The economy is forecast to grow 3.8 percent next year, and by 4.1 percent in 2014.
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