PPI at 5.1% in August

Thursday, September 27, 2012

Pretoria - The Producer Price Index (PPI) in August slowed to 5.1%, below market expectation.

"The PPI for domestic output shows an annual rate of change of 5.1% in August 2012. This rate is 0.3 % lower than the corresponding annual rate of 5.4% in July 2012," said Statistics South Africa (Stats SA) as it released the figure on Thursday.

PPI - which is the price of goods leaving factories and mines - was expected to come in at 5.3%.

Electricity which increased to13.8% year-on-year was the largest contributor, followed by products of petroleum and coal among others.

From July to August 2012 PPI rose by 0.7%.

"The monthly increase of 0.7% in the PPI for domestic output was mainly due to monthly contributions from increases in the price indices of agriculture (+0.2%) and mining and quarrying (+0.1 %)," noted Stats SA.

Economists expect producer inflation to moderate further in the months ahead as softer global demand contains the prices of certain commodities.

"However, a weaker rand and higher oil and food prices may pose some upside risks," said Nedbank economist, adding that whether the Reserve Bank's Monetary Policy Committee cuts rates or keeps them steady will depend on whether the combined global monetary stimulus sparks some recovery later in the year, in which case rates are likely to remain stable.

"If the global economy slips into recession then further easing can be expected. Our baseline view is that rates will remain stable with some reversal in policy easing possible in late 2013 or even early 2014."

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