South Africa’s producer price inflation slowed to 10,4% year-on-year in June, official data showed on Thursday, but a jump in the monthly rate continued to stoke expectations of higher interest rates.
Statistics South Africa said June producer price inflation slowed from an annual 11,3% in May but increased by 2,1% on a month-on-month basis, compared to a 1,1% rise the month before.
Economists polled by Reuters had forecast that annual PPI would come in at 10,4%.
”The fall in the year-on-year is not indicative of inflationary pressures coming down. The monthly increase strongly suggests that inflationary pressures are still strong,” Dave Mohr, economist at Citadel, said.
”I think it probably strengthens the case for an interest rate hike in August. We’re looking at half a percentage point.”
The rand was little changed at 6,9260 against the dollar, from 6,9215 before the data came out.
The central bank lifted its repo rate by 50 basis points to 9,5% last month, adding to 200 basis points worth of increases between June and December last year, in a bid to rein in inflationary consumer demand, most of it credit-driven.
Producer inflation has continued to outstrip consumer inflation and is bound to keep pressure on rising CPIX inflation.
The targeted CPIX rate increased by a steady 6,4% year-on-year in June, staying above the central bank’s 3% to 6% target for the third month in a row.
Reserve Bank Governor Tito Mboweni has said there is a strong upward bias in inflation beyond high food and fuel prices and that the country may have re-entered an interest rate tightening phase. – Reuters