SA Reserve Bank MPC and CPI will dominate data week ahead

South African Reserve Bank file photo

JOHANNESBURG – There  will be a flurry of data releases next week, but the focus of economists will be on the decision by the SA Reserve Bank (Sarb) Monetary Policy Committee (MPC) on Thursday.
Economists do not expect any change in the key repo rate after the MPC voted four to three to cut the repo rate by 25 basis points to 6.5% at the last MPC meeting in March.
Since then the rand has weakened, the oil price has increased and the Value Added Tax (VAT) rate was increased from 14% to 15%. All of these factors will have raised the inflation trajectory, but not to the extent that the MPC will be contemplating a rate hike just yet. 
The week starts off with a flurry of minor statistical releases. The March land transport, food and beverages, tourism accommodation and April steel production data help to give colour in how the different sectors of the economy are performing.
Income from tourism accommodation fell by 3.0% year-on-year (y/y) in February after a revised 2.9% (2.5%) y/y increase in January and there should be a return to a y/y increase in March. 
The number of stay units sold for the total industry fell by 4.6% y/y in February after a revised 1.5% (0.4%) y/y increase in January. 
The tonnage transported by land rose by 9.5% y/y in February after increasing by 9.2% in 2017. A smaller y/y increase is expected in March due to the Easter holidays. The February rise was driven by a 12.4% y/y jump in the tonnage moved by road after a 9.3% y/y gain in January. 
Rail transport is, however,  lagging with only a 2.0% y/y rise in February after a 2.7% y/y drop in January. 
Nominal income in the food and beverage industry rose by 7.7% y/y in February after a revised 3.2% (3.4%) y/y gain in January and a near-double digit increase should be expected in march due to the Easter holidays. Take-away outlets saw a 12.7% y/y surge in February after a 7.7% y/y jump in January. Restaurant income rose by 3.8% y/y in February after a 0.5% y/y drop in January. Catering services income returned to y/y growth in the fourth quarter with a 9.9% y/y rise in December after a 9.0% y/y increase in November following several months of y/y declines due to the cutback in catering for government. In January the increase was 8.2% y/y, which was followed by a 11.0% y/y jump in February.    
Steel production fell by 3.1% y/y in March to 527 000 tons after dipping by 0.9% y/y in February to 491 000 tons, rising by 8.1% y/y in January to 577 000 tons and surging by 20.9% y/y in December to 503 000 tons. A return to a y/y increase is expected in April.
The final major data release in the week ahead is the April consumer inflation data due for release on Wednesday. This is the first release that will have the higher VAT rate, but there will also be increased fuel levies that kicked in during April. As a result, economists are expecting the consumer inflation rate to head towards 5% y/y from a recent low of 3.8% y/y in March from 4.0% y/y in February and 4.4% y/y in January.
Food inflation was the determining factor in 2017 and 2016 as the drought caused food prices to rise in 2016 and the record maize harvest in 2017 led to an easing in food prices. Food inflation eased to 3.6% y/y in March from 3.9% y/y in February and should remain relatively low in April as there are plentiful food supplies.  Core inflation, which excludes volatile components such as food and energy, will tick higher due to the VAT rate increase after rising by 4.1% y/y in March from 4.0% y/y in February.