South African producer prices for all commodities rose by 1,9% in the 12 months to the end of March, from a 1,2% increase for the 12 months to the end of February, Statistics South Africa said on Thursday.
On the month, the producer price index (PPI) was up 0,6% compared with February’s 0,2% monthly increase.
The PPI was expected to rise to a 1,7% year-on-year (y/y) increase from only 1,2% y/y in February.
According to an I-Net Bridge survey of economists, the range was from 1,4% y/y to 2,5% y/y.
Mike Schussler, economist at T-Sec, said: “The figure is lower than I expected. It should be slightly positive for the bond market. I think inflation going forward might not rise as much as people think.”
George Glynos, market analyst at Econometrix Treasury Management, said: “The data was a little bit firmer than anticipated and makes the point that interest rates are unlikely to be reduced any further if pipeline pressures continue to accelerate as they have done through the March data — and if anything, bonds may lose some of their early gains as a result of the data, but overall market reaction is likely to be muted.”
According to Chris Hart, Absa economist, the PPI figure “may have been above expectation, but there isn’t any cause for worry”.
“Once the recent increases in the petrol price have filtered through, there should be more downside pressure on inflation. The fact that PPI is below CPI shows that deflation in likely to continue.
“There could be another 50 basis-point cut in the repo rate, most likely at the October meeting [of the South African Reserve Bank’s monetary policy committee], but the August meeting is a candidate [for a cut].” — I-Net Bridge