PPI registers -1.2% deflation

Thursday, December 17, 2009

Pretoria - The Producer Price Inflation registered deflation of -1.2 percent year-on-year in November, Statistics South Africa (Stats SA) reported on Thursday.

The figure is 2.1 percentage points higher than the -3.3 percent recorded in October.

According to Stats SA the change can be explained by increases in the annual rate of change in Producer Price Indices for products of petroleum and coal; mining and quarrying; agricultural products; forestry and basic metals.

From October to November 2009 the PPI for domestic output increased by 0.8 percent. This was mainly due to monthly contributions from increases in the price indices for mining and quarrying, agricultural products and basic metals.

Stats SA said the annual rate of change in PPI for exported commodities was -11.9 percent from the -13.1 percent in October. Imports came in at -5.7 percent compared to October's annual rate of -10.2 percent.

Market consensus was that PPI would come in at -1.8 percent year-on-year.

"We expected a -1.8 percent and it came in at -1.2 percent which is much lower. That is a seventh consecutive decline in PPI, the one reason for subdued producer inflation is the subdued demand conditions, relative commodity prices and the favourable exchange rate," Standard Bank senior economist Dr Johan Botha told BuaNews.

On whether the data would result in a rate cut when the Reserve Bank's Monetary Policy Committee meets next year, Botha said a cut was likely in mid-2010 due to possible concerns about the oil price and that economic growth could be higher.