South African producer prices for all commodities rose 2,3% in the 12 months to end June from a revised 1,2% (1,1%) for the 12 months to end May, Statistics South Africa said on Wednesday.
On the month, they were up 1,4% in June on an actual unadjusted basis, from a decline of 1,3% in May.
The June producer inflation rate was expected to be a median increase of 1,9% y/y, according to an I-Net Bridge survey of private sector economists. The range of forecasts was from 0,6% y/y to 2,5% y/y.
The following are economists’ reactions to the data:
Dawie Roodt, economist at PLJ Financial Services: “The number is worse than I expected. I am not too worried about inflation or PPI and still think we will get a rate cut after next month’s MPC meeting, but hopefully they won’t move by more than one percentage point.”
Annabel Bishop, economist at Investec: “PPI inflation rose purely as a result of the impact of the increase in electricity prices in June (usually implemented in July so there was a substantial base effect which will work out of the system in July’s data). Without the increase in electricity prices June’s PPI inflation would have fallen to 1,0% y/y from May’s 1,1% y/y. We believe the PPI data (excluding the base effect of the electricity price increase) is still supportive of further easing in CPIX inflation and therefore of further interest rate cuts this year (we forecast a 2% cut in August and a 1,5% cut in October).”
Ike Schussler, economist at Tradek: “This was expected to go up and I don’t think it is a problem. I do not see this figure playing a big role in the bond market and rand at all. This PPI figure suggests that we are not going to get deflation but lower inflation.”
Nicky Veldtman, economist at NIB: “I assume that most people expected this figure given that the oil price did go up substantially and this might be a big factor. I don’t see this figure being a major deterrent for the South African Reserve Bank to change their minds on interest rates.” ‒ I-Net Bridge