PPI Index Get Better

By | April 29, 2012
Pretoria – The Producer Price Index (PPI) eased to 7.2% year-on-year in
March, Statistics South Africa (Stats SA) said on Thursday.

“This rate is 1.1 percentage points lower than the corresponding annual
rate of 8.3% in February 2012,” said Stats SA on Thursday.

The lower rate could be explained by decreases in the annual rate of
change in mining and quarrying, products of petroleum and coal, food
manufacturing, agriculture, other manufacturers and tobacco products
among others, it said.

Market consensus was that it would ease to 7.9%. For the remainder of 2012, producer inflation is forecast to moderate further.

“Softer global demand, dragged down by recession in Europe and slower
growth in key emerging markets, will contain international commodity
prices for much of this year. However, upside risks remain due to
potentially higher food and oil prices as well as a weaker rand later
this year,” said Nedbank economists.

The bank said that inflation at production and retail levels was highly sticky with the sources remaining relatively contained.

“The Reserve Bank’s Monetary Policy Committee (MPC) will not be
comfortable with inflation at current levels, but the general lack of
pricing power within the economy and the vulnerable global situation
will probably convince the Committee to give the fragile economy more
time to heal,” said Nedbank, adding that it expects interest rates to
remain unchanged at 5.5% per annum.

“We still expect interest rates to remain on hold until November, when
continued high inflation and a firmer recovery are expected to force the
start of a moderate rise in interest rates.”

PPI is the price of goods leaving factories and mines.

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