March PPI seen at 5,5% y/y

South Africa’s producer price index (PPI) is expected to have increased in March at 5,5% year-on-year (y/y) from the 7,3% y/y seen in February, a survey by I-Net Bridge has found.

This will be the seventh consecutive decrease in producer price inflation after the 19,1% peak seen in August last year. Forecasts among the seven leading economists surveyed ranged from just 5,2% y/y to 6,3% y/y, while PPI was at 11,9% a year ago and thus provided a high base.

The main reason for the decline is seen as the slowdown in mining and commodity-related prices off the very high base set in 2008.

The 38 cents a litre diesel price decline is set to have brought the prices of petroleum and coal down in the index, while agricultural food prices could also come off.

The annual average for PPI in 2008 was 14,2% from a revised 10,9% in 2007 and from the 7,7% recorded in 2006 and from 3,1% in 2005, and compared with an average of only 0,6% in 2004 and 1,7% in 2003. The 2004 average was the lowest since 1959, when there was no change in producer prices.

The lowest annual consumer inflation in the post-1945 period was also in 1959 at 1,1%.

Statistics South Africa will release the data at 9am on Thursday, April 30, in order to accommodate the central bank in its monetary policy deliberations.

The producer price index is now based on an updated set of weights, as well as the prices of South African output, whether the output is sold in the domestic market or exported.

The reweighting has resulted in the metals, minerals and oil components receiving heavier weightings, which was a big factor behind some of the higher outcomes from May last year. — I-Net Bridge

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