Producer inflation continues to decline

The Producer Price Index (PPI) continued to decline in October, Statistics South Africa said on Thursday.

The Pretoria-based agency said October’s PPI fell by 3,3% year-on-year from a decline of 3,7% year-on-year in September.

From September 2009 to October 2009, the PPI for domestic output decreased by 0,1%.

Most economists had expected a decline of 3.1 percent year-on-year.

”The slightly lower than expected PPI figure is reflective of the severity of the recession SA has come through,” Investec Group economist Annabel Bishop said.

”The recent figures continue the general moderation in the CPI and PPI experienced this year, but are unlikely to, on their own, change the South African Reserve Bank’s inflation outlook and hence monetary policy stance,” she said.

Bishop said an additional rate cut would be beneficial, not least to boost confidence, but CPI inflation would rise back above target in the next few months owing to seasonal and base effects.

”For similar reasons, the ascent in the PPI will likely be particularly sharp next year, moving to above six percent by the end of 2010,” she said.

PPI fell 0,1% on a monthly basis after a monthly decrease of 3,2% in September. — Sapa

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