South African producer prices for all commodities fell by 1% in the 12 months to the end of February from a 1,4% decline for the 12 months to the end of January, Statistics South Africa said on Thursday. On the month, the PPI was up 0,5%, compared with no change in January.
According to an I-Net Bridge survey of 10 economists, consensus expectations call for a year-on-year (y/y) decline of -1% from January’s -1,4% y/y and December’s -1,8% y/y. November recorded a post-1945 record low decline of -2,5% y/y. The range of forecasts was from -0,7% y/y to -1,2% y/y.
The following are economists’ reactions to the data:
Dawie Roodt, chief economist at the Efficient Group: “It is slightly better than what we expected and partly neutralises the bad news of yesterday [Wednesday]. I don’t think this changes our view on interest rates, which are likely to increase, with possibly a 50 basis point rise as soon as June.”
Mike Schussler, economist at Tradek: “This figure is more than I expected. It shows that inflation is not coming from the goods side but from the administrative and services side. The number will be good for the bond market and neutral for the rand.”
Michael Keenan, market analyst at Econometrix Treasury Management: “The PPI figures were exactly in line with expectations. The bond market is likely to continue to weaken, as it is clear that the interest-rate cycle has bottomed out. The next repo rate move by the South African Reserve Bank is likely to be a hike of about 50 basis points and that could be in the third quarter of 2004.”
Magan Mistry, senior economist at Nedcor: “The figures are basically in line with market expectations and still suggest that inflation at producer levels remains subdued. The stronger rand is impacting on lower producer price inflation.”
Annabel Bishop, economist at Investec: “Less deflationary price pressure was recorded at the producer level in February, as a consequence of rising oil prices and some upwards price pressure from food. We still believe that PPI inflation (as opposed to deflation) will re-emerge in Q2.04. We expect that interest rates will remain unchanged over most of 2004, with a small 50 basis point hike occurring in December.” — I-Net Bridge