ECONOMY: Lower Inflation Expected
Recent Western Cape Business News
The average inflation expectation for 2011 eased from 6.1% previously to 5.5% during 2010Q4. This was due to all social groups lowering their inflation expectations for next year, say the Stellenbosch BER in its latest report.
The inflation outlook for 2012 also improved with the average expectation moderating from 6.4% to 6.2%. This represents the third consecutive quarter that inflation projections for 2012 were downwardly revised.
The average inflation forecast for 2010 receded from 5.7% previously to 5.4% during 2010Q4.
Analysts are the only group that anticipate inflation to remain within the target band over the entire forecast horizon. Business people forecast inflation to rise from within to above the target over the surveyed horizon. Trade unions expect inflation to ease marginally during 2011, before accelerating in 2012, but for it to remain above the target over the whole period.
Analysts trimmed their inflation forecast for 2011 by 0.7 percentage points (%pts) to 4.5%. CPI expectations for 2012 moderated from 5.6% to 5.4%. Furthermore, analysts reduced their 2010 inflation expectation by 0.2 %pts to 4.3%.
The inflation outlook amongst business people improved notably during 2010Q4 as they significantly lowered their forecasts for the entire forecast period (2010 to 2012). Inflation estimates for 2010 and 2011 were downwardly revised by 0.8 percentage points (%pts) each to 5.7% and 6.0% respectively. Business representatives also reduced their 2012 inflation forecast by 0.7%pts to 6.4%.
Trade unions lowered their CPI expectation for 2011 by 0.4%pts to 6.0%. However, they raised their 2012 forecast from 6.5% previously to 6.6%. Trade unions projected inflation to average 6.1% in 2010 (previously 6.2%).
After revising their CPI forecasts for 2010 form 8.3% in the second quarter to 7.4% during 2010Q3, households kept their inflation forecast unchanged in the latest survey.
Overall, the average inflation outlook improved during 2010Q4, but the trend still suggests that inflation will bottom in 2010, before accelerating through to 2012.
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