South Africa’s producer price index (PPI) rose by 11,3% year-on-year in May from an 11,1% increase in April, Statistics South Africa data on Thursday showed.
The PPI rose 1,1% on a monthly basis after April’s monthly increase of 1,7%.
The PPI was expected to have increased at 11,1% year-on-year in May, a survey by I-Net Bridge found. PPI was at 5,9% year-on-year a year ago. Forecasts ranged from 10,9% to 11,4%, with four of the respondents predicting a dip in the year-on-year growth rate and three expecting it unchanged. This left four who felt that PPI would grow to above 11,1%.
The 11,1 % level recorded in April was the highest level in more than four years.
Commented Jean Mercier, Citigroup’s chief economist: “It’s a little bit worse than expected. The imports were a little stronger than expected. On the balance, it shows that prices continue to accelerate on the South African economy — something the South African Reserve Bank [SARB] will be wary about.”
The number is clearly above expectations, said Russell Lamberti, economist at ETM, “but not too much. It’s very much in line with the numbers yesterday, but overall, price pressures remain on the economy and that’s a concern.”
Annabel Bishop, economist at Investec Group Economics, said: “PPI inflation came close to expectations. The chief drivers were upward pressure from food prices and oil and petroleum product prices. There was also significant evidence of imported price pressures.
“We continue to believe that the SARB will leave interest rates unchanged this year to allow time for the effect of previous monetary tightening and the new National Credit Act to become apparent. The risk to this forecast is for another 50-basis-point increase this year.”
The PPI figure was in line with Absa’s expectations, said Markus Riddle, economist at Absa.
“There was no surprise for us,” he said. “If you look at the breakdown, it was again the food prices and the fuel story [same as CPI] which was a major driver for the PPI.
“Hopefully this number is the peak of the PPI. The number is still stubbornly high and we can expect it to remain high for May and June, but during the second half of the year it should be low, and this is probably what the market expects too. We don’t think it will affect the market in terms of bond prices and currency.” — I-Net Bridge