Johannesburg — Inflation slowed more than expected to 3,7% year-on-year in July, Statistics South Africa (StatsSA) announced today.

Inflation slowed to 3,7% year-on-year in July, Statistics South Africa (StatsSA) announced today.

A Reuters poll last week forecast CPI would ease to 4,0% year-on-year, and quicken to 0.9 percent month-on-month.

On a month-on-month basis, the CPI increased by 0,6%.

According to StatsSA, the housing and utilities index increased by 3,0% between June 2010 and July 2010.

The biggest contributor to inflation was a 16,3% increase in electricity and other fuels and an 8,8% increase in water and other services.

Food and non-alcoholic beverages contributed 0,3%. This was driven a 3,8% increase in vegetables. However, the price of fruit decreased 1,4%.

The restaurants and hotels index decreased by 3.9% between June and July,

mainly due to a 15.4% decrease in accommodation- hotels.

Efficient Research economist Freddie Mitchell said whether or not lower inflation meant an interest rate cut by the Reserve Bank could be expected in September was unclear. Much depended on the health of consumer spending.

"The drop in CPI was mainly due to administered price electricity prices and unexpected water price increases. This will constrain consumer demand a bit further but that demand could still push ahead," he said.

He said job losses and low employment rates had constrained demand in the economy quite significantly and there needed to be a turnaround on those issues soon.