/ 26 June 2008

May PPI figures ‘a disaster’

South Africa’s producer price inflation (PPI) accelerated above expectations to 16,4% year-on-year in May, from 12,4% in April, official data showed on Thursday.

Statistics South Africa said month-on-month PPI, representing domestic output, stood at 4,9%, compared with 2,1% previously.

Imported commodities inflation jumped to 23% compared with 21,2% previously.

Danelee van Dyk, economist at Standard Bank, said: ”The sharp increase is linked to steel prices and the cyclical nature of commodity prices. Excluding iron and steel prices, PPI is in line with expectations, but we still think it will peak to around 16% in few months’ time, and not just yet.”

According to Mike Schussler, economist at T-Sec, the PPI is ”a disaster and a shocking figure, regardless of the iron and steel. Iron and steel is an essence of PPI and people still feel the effect.

”It’s a bit of a problem — we are still going to get the electricity increases coming through on this, so it’s unlikely we will see the PPI in single figures for some time to come.

”This is not the only figure we have to worry about. If you add this to the implied wholesale inflation rate of 16.8%, we now have two inflation figures out of four pointing to difficult times ahead.” — Reuters, I-Net Bridge