South Africa’s October 2005 producer price index (PPI) rose by 4,2% year-on-year from a 4,6% increase in September, Statistics South Africa said on Thursday.
The month-on-month change was a 0,1% increase in October, compared with a 0,5% drop in September.
The consensus forecast for the October PPI was an easing to a 4,4% increase with a range of 4,2% to 4,8%.
John Luus, economist at Absa, commented: “I think this number still reflects that inflationary pressures are under control and I think, moving towards 2006, if we see some recovery in the rand and the oil price coming down, it will remain this way and may even see a slightly lower trend.
“Take this together with what is happening with the lower trend in the CPIX and we are talking about a possible interest-rate cut in the first half of next year.”
Mike Schussler, economist at T-Sec, said: “This is also better than expected and will probably be very good for the bond market. It just confirms that yesterday’s CPI wasn’t a fluke. Since yesterday, rate hikes were out of the picture and this confirms that rate hikes are out of the picture for the moment.”
The October PPI is “well below market expectations”, said George Glynos, market analyst at Econometrix Treasury Management, “and will provide support to the bond market. The pipeline pressures and second-round inflation effects seem to be muted.
“If the current inflation trend continues, then there could be an interest-rate cut toward the end of 2006. For now, we believe that interest rates will remain flat.” — I-Net Bridge