PPI quickens to 9,4% in June

South Africa’s producer inflation quickened to 9,4% year-on-year in June from 6,8% in May, official data showed on Thursday.

Statistics South Africa said on a monthly basis producer inflation, representing domestic output, was at 4% compared with 0,2% in May.

Exported commodities inflation stood at 7% year-on-year in June compared with 4,8% the month before, while imported commodities inflation slowed to 3,7% year-on-year from 6,5% previously.

A Reuters poll last week showed PPI was expected to quicken to 7,4% year-on-year and to 2,4% month-on-month.

Carmen Altenkirch, economist at Nedbank, told I-Net Bridge that the increase was mainly due to a seasonal increase in the price of electricity.

“Although PPI is expected to continue to rise over the coming months, it has no immediate implications for our positive consumer inflation outlook, as it is being driven by commodity inflation. Price increases for manufactured goods, which make up around 60% of the basket, remained subdued, constrained by weak infrastructure and capital spending.

“Commodity prices have declined steadily over the quarter, with the Economist commodity price index down by 5%, mainly due to a 10% fall in metal prices. This should continue to be reflected in lower prices for metal ores and petrol on a monthly basis. Metal prices have retreated as investors exited riskier asset classes on concerns about global growth and a possible slowdown in Chinese metal demand.”

Chris Hart, chief economist at Investment Solutions said the figure had come in above their expectations of 7,7%.

“This reflects the high cost pressures in the inflation pipeline. It is a threat to consumer inflation. However, the stronger rand will likely temper the negative effects of the PPI in the near term.”

Russell Lamberti, economist from ETM, said the figure had been a big surprise.

“However, if it continues in this manner for longer time periods, it will squeeze corporate profitability and margins.” – Reuters, I-Net Bridge

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