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April PPI worse, ‘but not end of the world’

South Africa’s producer price index (PPI) rose by 5,5% year-on-year in April from a 5,4% increase in March, Statistics South Africa said on Thursday.

The PPI rose 1% on a monthly basis after March’s monthly rise of 0,4%.

The index was expected to have eased to 5,2% year-on-year in April from March’s 5,4% increase, according to a survey of economists by I-Net Bridge.

Forecasts of economists surveyed ranged from 5% to 5,4% y/y.

Commented Mike Schussler, economist at T-Sec: “It’s a bit higher than I expected and I suspect it will have a negative impact on the bond market. But I don’t think it’s the end of the world. I think PPI is reaching its peak and hopefully we will see it go down from here.”

Colen Garrow, economist at Brait, said: “The figure is worse than expected but perhaps not enough to move rates. Looking ahead, the influences are unchanged — but now there’s the currency to consider. But at some stage — later in the year — the SARB [South African Reserve Bank] could move rates higher.”

“PPI inflation came out higher than expected,” said Annabel Bishop, economist at Investec. “The bulk of the price pressure came from high oil prices, with some very modest, and not unusual, price increases recorded by the food, beverages and electricity categories.

“We still believe interest rates will remain unchanged over 2006 (with the risk to this forecast being a 50 basis-point hike).” — I-Net Bridge

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