PPI slows to 5.4% in July

Thursday, August 30, 2012

Pretoria - The Producer Price Index (PPI) slowed to 5.4% in July from 6.6% in June, Statistics South Africa (Stats SA) said on Thursday.

Stats SA said the lower PPI - which is the price of goods leaving factories and mines - could be attributed to decreases in the electricity price that decreased from 19.6% in June to 14.5% in July; while mining and quarrying decreased from 6.9% in June to 3.8% in July. Coal decreased from 7.7% to 5.6%.

From June 2012 to July 2012 the PPI for domestic output increased by 1.6%.

"The monthly increase of 1.6% in the PPI for domestic output was mainly due to monthly contributions from increases in the price indices of electricity, gas and water," said Stats SA.

The PPI came up marginally above market expectation of 5.2%.

Inflation is expected to moderate further in the months ahead as softer global demand contains prices of certain commodities.

"A weaker rand and high oil and food prices may offset some of the lower prices. We think that the MPC will keep rates unchanged at their meeting in September," said Nedbank.

The decision to either cut rates or keep 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, said the bank.

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