South Africa’s July 2005 producer price index (PPI) rose by 3,6% year-on-year from a 2,3% increase in June, Statistics South Africa said on Thursday.
The month-on-month increase was 1,1% in July, compared with a 1,5% rise in June.
The consensus forecast for PPI was growth of 3% (0,5% month-on-month) in July and the range of economists’ forecasts was from 2,4% to 3,4%.
Nico Kelder, economist at the Efficient Group, commented: “This is a very high increase — higher than we expected. This is the final nail in the coffin of any hope of a rate cut. It might indicate that the next rate movement will be to the upside in early 2006.
Said Mike Schussler, economist at T-Sec, said: “The figure is well above expectations; it is another shock to the system, which will be bad for the bond market. I think it will be neutral for the rand and equities.
“Chances of an interest-rate cut for this year are now out of the window. We are now hoping that oil prices will be coming down.”
Chris Hart, Absa economist, said: “There is a big jump in PPI, and PPI is following a similar trend to CPIX. PPI is higher due to negative influences during July, like the weaker rand and the higher oil price.
“The latest PPI number will cool expectations of an interest-rate cut, but doesn’t pose a threat of interest-rate hikes.” — I-Net Bridge