January's PPI slows to 9.2%

Thursday, February 26, 2009

Pretoria - The Producer Price Index (PPI) for January 2009 has come in at 9.2 percent year-on-year (y/y) which is 1.8 percent lower than December's figure of 11 percent y/y, Statistics South Africa (Stats SA) reported on Thursday.

The latest PPI statistics are released against the backdrop of global and domestic economic woes which has resulted in the country's fourth quarter 2008 Gross Domestic Product (GDP) figure sinking into the red for the first time in a decade.

Stats SA reported that the PPI for exported commodities showed an annual rate of increase of 2.6 percent at January 2009, but that this still indicated a drop of 2.2 percent than the corresponding annual rate of 4.8 percent at December 2008.

"The annual increase of 2.6 percent in the PPI for exported commodities is mainly due to annual contributions from increases in the price indices of basic metals, food at manufacturing and non-electrical machinery and equipments.

"These increases were partially counteracted by decreases in the price indices of products of petroleum and coal," Stats SA reported.

On a month-to-month basis, the PPI fell by 0.7 percentage points, Stats SA said.

The most recent Consumer Price Index (CPI) figure, which is the Reserve Bank's new inflation measure, coupled with the latest PPI figure indicates that inflation is on a downward trend and another 100 basis point cut in the repo rate is on the cards when the Monetary Policy Committee (MPC) meets again in April 2009.

Referring to whether an interim MPC meeting could be called to institute rate cuts in March and April, Reserve Bank Governor Tito Mboweni on Thursday morning said: "There is no meeting of the MPC that has been called, but the MPC can meet anytime."

He added that if the MPC will meet, the public would be well informed.

"The MPC does not take decisions based on a single number [such as January's inflation figure or the PPI figure], and does not take decisions based on historical data as our task is to look forward, and monetary policy does not work backwards but forwards."

The latest factory gate prices indicate manufacturing and food price inflation should ease as the demand for goods locally and internationally calms with the onset of global economic recession.