June PPI contracts 4,1%

Producer price inflation (PPI)—which is the price of goods leaving factories and mines—fell for a second month in a row, Statistics South Africa said on Thursday.

June’s PPI figure contracted 4,1% year-on-year from a 3,0% contraction in May.

“The PPI figure and Wednesday’s CPI [consumer price inflation] figure are both good news for the rate cut perspective,” Nedbank economist Carmen Altenkirch said.

“The figures show that inflationary pressures are beginning to moderate and we see a further 100 basis points cut this year,” she said.

However, the South African Reserve Bank would probably keep rates on hold for August.

“Their rationale used to keep rates unchanged hasn’t changed fundamentally—so expect the cuts towards the end of the year when the inflation outlook improves,” Altenkirch said.

Mike Schussler, director at Economists.co.za, said: “It shows there is still commodity price deflation, but not on the services side. I think we will see lower food prices so that’s good news.”—Sapa, I-Net Bridge

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