PPI at 5.8% in January

Tuesday, March 5, 2013

Pretoria - South Africa’s new headline producer Price Inflation was at 5.8% in January, Statistics South Africa (Stats SA) said on Tuesday.

“The annual percentage change in the Producer Price Index (PPI) for final manufactured goods was 5.8% in January 2013. From December 2012 to January 2013 the PPI for final manufactured goods increased by 0.5%,” said Stats SA.

The January number slowed to 5.8% from a recalculated 6.3% in December 2012.

The January 2013 release is the first one to feature five industry specific PPIs with a new weighting structure and product list.

In July 2012, Stats SA announced that the old PPI would be split into a set of five separate PPIs, namely final manufactured goods, intermediate manufactured goods, electricity and water, mining, and agriculture, forestry and fishing.

The number of items used to calculate PPI - which is the price of goods leaving factories - has been reduced from 800 to 273. The PPI changes were taken to bring the index in line with international standards.

“The latest headline producer inflation figures do not alter our interest rate view. We believe that rates will remain at current levels for most of 2013 with some reversal in policy easing either later this year or early in 2014. The Reserve Bank's MPC [Monetary Policy Committee] will have to strike a balance between lacklustre growth and upside inflation risks,” said Nedbank economists of the data.

The MPC is to hold its second meeting on interest rates from 18 to 20 March 2013.

“Together with the wider current account deficit, probably weakens the case for further rate cuts. Growth is also expected to rise to above 3% in 2014, which means that a forward looking inflation targeting central bank such as the SARB may want to start normalising interest rates this year or early next year,” said the bank. - SAnews.gov.za