SA February confidence up

JOHANNESBURG – South Africa’s economic confidence rose in February on optimism that rand strength and lower crop prices would help tame inflationary pressures, with interest rates seen steady until 2007, a Reuters poll showed.

The survey of 16 economists published on Friday showed the Reuters Econometer, a confidence index of 6 weighted indicators, climbed to an all-time high of 282,88 from 280,17 in January. Sentiment in Africa’s largest economy was boosted by modest downward revisions to inflation and rand forecasts between now and 2008, which together account for 50 per cent of the index.”One of the main concerns was the potential impact of the food component.The good rains in the summer crop areas of the country should result in a better-than-expected maize crop,” said Johan Rossouw, an economist at Vector Securities.”We have also had the World Food Programme saying they would not purchase maize in South Africa for their programmes in the continent.The prospects for maize prices have deteriorated.”Food prices were behind the surge in both consumer and producer inflation in the past few months.This followed a rally last year in staple maize prices on the back of dry weather conditions and predictions of a smaller crop.Maize prices have since eased to around 1 095 rand a tonne from a 22-month peak of 1 229 rand in December.The survey forecast CPIX inflation, watched by the central bank for monetary policy, averaging 4,31 per cent this year, rising to 4,71 per cent in 2007 and remaining steady at that level in 2008.This compares with January’s predictions of 4,35 per cent in 2006, 4,76 per cent next year and 4,90 per cent in 2008.The index, which excludes home loans, rose by an annual rate of 4,3 per cent in January from four per cent in December.It has stayed inside its three to six per cent target range for 29 consecutive months.Economists said they were encouraged by oil prices, which have held below US$65 per barrel.That, combined with a relatively steady rand, was positive for the inflation outlook, they said.”We expect CPIX to peak at 4,5 per cent in February, then decline to hover between three – four per cent over the latter part this year, barring any major shocks,” said Rossouw.The February consumer inflation data will be released on March 28.The Reserve Bank has forecast the CPIX index will peak at around 4,9 per cent in the first quarter of 2007, before declining to around 4,7 per cent by the end of 2008.But the improved inflation outlook and a sharp slow down in fourth-quarter growth were unlikely to persuade the Reserve Bank to ease monetary policy before the end of 2007, because of robust domestic consumption, economists said.The survey saw growth around 4,54 per cent this year, slightly below the government’s forecast for 4,9 per cent.The economy grew by 4,9 per cent in 2005 – its fastest since 1984.- Nampa-ReutersSentiment in Africa’s largest economy was boosted by modest downward revisions to inflation and rand forecasts between now and 2008, which together account for 50 per cent of the index.”One of the main concerns was the potential impact of the food component.The good rains in the summer crop areas of the country should result in a better-than-expected maize crop,” said Johan Rossouw, an economist at Vector Securities.”We have also had the World Food Programme saying they would not purchase maize in South Africa for their programmes in the continent.The prospects for maize prices have deteriorated.”Food prices were behind the surge in both consumer and producer inflation in the past few months.This followed a rally last year in staple maize prices on the back of dry weather conditions and predictions of a smaller crop.Maize prices have since eased to around 1 095 rand a tonne from a 22-month peak of 1 229 rand in December.The survey forecast CPIX inflation, watched by the central bank for monetary policy, averaging 4,31 per cent this year, rising to 4,71 per cent in 2007 and remaining steady at that level in 2008.This compares with January’s predictions of 4,35 per cent in 2006, 4,76 per cent next year and 4,90 per cent in 2008.The index, which excludes home loans, rose by an annual rate of 4,3 per cent in January from four per cent in December.It has stayed inside its three to six per cent target range for 29 consecutive months.Economists said they were encouraged by oil prices, which have held below US$65 per barrel.That, combined with a relatively steady rand, was positive for the inflation outlook, they said.”We expect CPIX to peak at 4,5 per cent in February, then decline to hover between three – four per cent over the latter part this year, barring any major shocks,” said Rossouw.The February consumer inflation data will be released on March 28.The Reserve Bank has forecast the CPIX index will peak at around 4,9 per cent in the first quarter of 2007, before declining to around 4,7 per cent by the end of 2008.But the improved inflation outlook and a sharp slow down in fourth-quarter growth were unlikely to persuade the Reserve Bank to ease monetary policy before the end of 2007, because of robust domestic consumption, economists said.The survey saw growth around 4,54 per cent this year, slightly below the government’s forecast for 4,9 per cent.The economy grew by 4,9 per cent in 2005 – its fastest since 1984.- Nampa-Reuters