No immediate inflation relief appeared to be on the horizon after last month’s growth in overall producer prices, experts said on Wednesday.
”We can expect the inflation story to get more ugly before base effects provide some respite,” Standard Bank economist Monica Ambrosi said.
She noted that agriculture and food at manufacturing continued to be the source of upward price pressure.
Statistics SA earlier in the day said year-on year producer price inflation stood at 15,4% last month compared with 15,2% in July. It ascribed the annual percentage change in the production price index (PPI) for all commodities partly to a 28,2% annual increase in the price indices for food at manufacturing.
The annual percentage change in the PPI for locally produced commodities was at 15,3% last month — up from the corresponding rate of 14,6% in July.
This was mainly due to annual increases in the price indices for food at manufacturing (3,7 percentage points) and for agricultural products (2,6 percentage points).
Old Mutual Asset Managers said the PPI figures confirmed there were still significant price pressures inherent in the economy. The August PPI figure for imported commodities stood at 15,6% last month — down from 16,8% in July.
Ambrosi welcomed the downturn in imported price pressures but predicted this was only a temporary turnaround. Month-to-month price pressures might remain strong as international crude oil prices kept on rising in anticipation of United States military action against Iraq.
”In addition, rand volatility may exacerbate upward price pressures by impacting negatively on broader imported price pressures,” Ambrosi said.
”These threaten to keep food and transport prices high, with ensuing price effects.”
Old Mutual agreed the landed cost of imported crude oil was likely to rise in the coming months.
”This category could add significant pressure over the next few months in the light of increased war talk and the already higher oil price.”
Ambrosi said the August PPI numbers were not as surprising as those of the previous months, but price pressures remained indisputably high and on the rise. ”This will not ease pressure on the inflation hawks at the Reserve Bank,” Ambrosi said.
The past year has seen four interest rate hikes in the central bank’s drive to bring inflation down, with the latest increase pushing the prime interest rate up to 17%.
Old Mutual said: ”The risk of another interest rate increase in November cannot be completely discounted.” – Sapa