Consumer prices rose by 0.24% from August to September, slightly below the Bloomberg market consensus of 0.26% and our 0.28% call. The main positive contributors in the month were education (+1.9% MoM; +8bps), housing and utilities (+0.2% MoM; +5bps), restaurants and hotels (+0.5% MoM; +5bps) and transport prices (+0.2%; +3bps). Meanwhile, food prices increased by a mild 0.1%, contributing 2bps to the headline CPI print and reflecting a moderate effect of the transportation strike during the first week of September. Housing and food prices explained most of the surprise relative to our forecast, partially countered by higher education prices. Consumer prices excluding food rose 0.27% MoM (+0.49% one year earlier), while inflation excluding food and energy rose by 0.41% (core; 0.42% one year earlier). Overall, annual headline inflation fell by 31bps from August to 5.81%, while core inflation remained broadly stable from 6.09% to 6.08% (10.60% peak in April last year).
Services inflation remains sticky. Non-durable goods inflation (mainly food) came in at 4.73% YoY, dropping 99bps from the previous month. Meanwhile, energy inflation fell to 11.35%, a drop of 239bps from August. Durable goods inflation remained in negative territory, but eased from -5.3% to -4.6%. Services inflation increased 3bps to a still elevated 7.87% (9.51% peak in September). At the margin, we estimate that inflation accumulated in the quarter was 3.6% (SA, annualized; 7.2% in 2Q24). Core inflation moderated to 5.0% from 5.8% in 2Q24 (SA annualized).
Our Take: Despite the transportation strike at the beginning of September, food inflation did not respond. Our preliminary estimate for October’s CPI, to be released on November 8, is between 0.2% and 0.3%, resulting in annual inflation remaining broadly stable at 5.8%. We expect a YE24 CPI at 5.6%, with some upside risks remaining, particularly from energy prices in the face of low reservoir levels and the stickiness of rent prices. Nevertheless, with inflation continuing to fall, we believe that BanRep will accelerate the cycle to 75bps at the next MP on October 31. Nevertheless, the recent tightening of global financial conditions amid heightened geopolitical risks means we cannot rule out another 50bps.