South African producer prices for all commodities fell by 0,2% in the 12 months to the end of April from a 1,2% decline for the 12 months to the end of March, Statistics South Africa (Stats SA) said on Thursday. On the month, the PPI was up 1%, compared with a 0,2% drop in March.
South Africa’s April 2004 producer price index (PPI) was expected to continue the year-on-year (y/y) deflation trend that began in September 2003, when the index posted the first y/y deflation since World War II.
According to an I-Net Bridge survey of economists, consensus expectations were for a y/y decline of -0,6%. The range was from -0,9% y/y to a single economist who forecast a positive producer inflation number of 0,5% y/y.
The following are economists’ reactions to the data.
Johan Rossouw, chief economist at Vector Securities: “It is in line with my own forecast, but a bit of a disappointment for the market though because it expected a much lower number. I think this is going to be a trend from here on as a result of global oil prices which we’ll see in our figures in the next few months.”
Dawie Roodt, economist at Efficient Group: “It’s exactly the opposite of what we expected. Yesterday [Wednesday] the CPI was much better than expected, now the PPI is worse than expected. It’s a very confusing world. Now I am completely confused about what is really going on with inflation in South Africa — it is not working out the way I expected.
“We need more information on money supply and private sector credit extension before we can make a call on what is going to
happen to interest rates.”
Mike Schussler, economist at T-Sec: “I think this is the longest period we have seen deflation for a good 30-odd years. Together with yesterday’s CPIX, it indicates that we are still in a lower inflation environment and even with higher oil prices, inflation will remain lower for a lot longer. The number is good news for the bond market. After CPIX, this number indicates that monetary policy can remain at these levels for a lot longer than most people thought.”
John Loos, economist at Absa: “The increase in PPI signals that CPIX is going to resume its upward move in coming months. I haven’t seen the details, but the increase in PPI is likely to have been due to the increase in the petrol price. As a result of the PPI figure, we are sticking to our forecast of a 100 basis-point increase in the repo rate in October.”
Monica Ambrosi, economist at Standard Bank: “This is obviously worse than imagined. It adds to the caution we expressed yesterday relating to oil shocks, following the release of CPI data. Other than that, there is no reason to panic on these numbers just yet but to wait and see if this is the start of sustained inflation.” — I-Net Bridge