• We forecast a marginal increase in CPI inflation to 5.0% y/y in August from 4.9% y/y in July. Inflation likely reached its trough of 4.9% y/y in July — a month in which we also saw the largest petrol price cut in over three years (-85c/l; -7% m/m). The transport index (w=18.80) is likely to have increased by 2.5% in August, mainly due the 80c/l increase in the price of petrol.

  • We expect high global grain prices to start filtering into the index of food and non-alcoholic beverage inflation, which is weighted at 15.68% in the CPI basket. We expect some pass-through to CPI food from high maize and wheat prices in Q4:12 and persistence of this pressure in H1:13. Based on our expectation for higher fuel and food prices, we have revised our CPI forecast slightly higher for 2012 and 2013. We now expect CPI to average 5.6% in 2012 (from 5.5%) and 5.4% in 2013 (from 5.2%).

  • We expect retail sales growth to slow to 7.5% y/y in July from 8.3% y/y in August. We forecast a m/m decline of 0.2% sa in July from 1.9% sa in June, driven by a marginal contraction in textiles, clothing, footwear and leather goods.

  • Trends in residential building activity in the year to July will likely to continue to underwhelm. We expect growth in residential building to ebb around 0% in H2:12. Feeble building confidence, as well as subdued planning activity, are unlikely to provide stimulus for a change in subdued trends in residential buildings completed.

  • We expect the SARB to keep rates at 5.00% in its 20 September MPC meeting.

  • We expect a decline in Stats SA’s Quarterly Employment Survey in Q2:12. Employment in the formal sector increased in Q1:12, notwithstanding slower output growth. However, we expect the drag on the employment numbers to come from the ailing manufacturing and the mining sectors.