March PPI at 7.2%

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. – BuaNews