South Africa’s September 2005 producer price index (PPI) rose by 4,6% year-on-year (y/y) from a 4,2% y/y increase in August, Statistics South Africa (Stats SA) said on Thursday.
The month-on-month (m/m) figure was down 0,5% in September compared with a 0,5% rise in August 2005.
The PPI was expected to rise to a 4,5% y/y increase. According to an I-Net Bridge survey of economists, the range was from 3,5% y/y to 5,4% y/y.
Reacting to the figures, Mike Schussler, an economist at T-Sec said: “The figure is a bit of a disappointment; it probably has more to do with higher oil prices than anything else. I don’t think it will have any impact on the bond market or any other financial markets.”
Magan Mistry, an economist at Nedbank said: “It’s close to market expectations and
comes out after the modest increase in consumer price inflation, but I’m not sure of the second round effects of the oil price, which should start coming through.
“I think producer price inflation is expected to rise in coming months, possibly crossing 6% in the first quarter of next year, and that will feed through to consumer inflation.
“Considering the comments that have come from officials, I think we will see a hike in interest rates around February next year.”
Annabel Bishop, an economist at Investec said: “PPI inflation came out below expectations, solely due to a sharp drop in electricity costs. This was due to
lower than expected usage of electricity and is not likely to be repeated in October’s inflation figures. High oil prices placed significant upward pressure
on PPI inflation which was countered by the sharp drop in electricity prices.
“We expect that PPI inflation will rise next month on the back of high oil prices and end the year above 5% on the back of high oil prices and that interest rates will remain unchanged over the remainder of 2005.”
Tebogo Hlabioa, an economist at Metropolitan Asset Managers: “These are very
good numbers and came lower than market expectations. The increase was due to a lagged effect of higher crude oil prices evident in the other minerals sub- component. The electricity component counter-effected the increase due to the
summer season lower electricity tariff. We believe that the figures are quite
favourable for the MPC to keep the rates steady for December.”
Michael Keenan, a market analyst at Econometrix Treasury Management, said the figures were slightly better than expected, which coupled with Wednesday’s soft consumer inflation data, would help allay fears of an interest rate hike at the December MPC meeting.
“This should in turn be conducive for further short-covering in the bond market and put further pressure on the rand. We remain of the opinion that the Reserve Bank will not hike rates for at least six months, especially considering that CPIX inflation is likely to dip in the forthcoming month due to anticipated petrol price cuts and statistical base effects reasons.”
Johan Rossouw, the chief economist at Vector Securities said that obviously the numbers were below market consensus but were above his own expectations.
“The big issue was the adjustment of electricity from winter to summer tariffs but such changes are seasonal. The pressure is still upward while outlook for inflation has improved from the forecast perspective. I doubt the headline figures will have a significant impact on the MPC decision.” – I-Net Bridge