Producer inflation at 6,4% in October

South Africa’s producer inflation braked to 6,4% year-on-year in October from 6,8% in September, official data showed on Thursday.

Statistics South Africa said on a monthly basis producer price inflation (PPI), which represents domestic output, fell by 0,4% compared with -4,1% in September.

Exported commodities inflation slowed to 6,6% year-on-year in October from 7,6% the previous month, while imported commodities inflation was at 1,3% year-on-year from 0,7%.

Carmen Altenkirch, economist at Nedbank said, ” Producer inflation edged slightly lower in October to 6,4% due to a further seasonal decline in electricity prices. International soft and industrial commodity prices have risen sharply in recent months on the back of strong investment demand. However, the impact domestically has been muted so far due to the strength of the rand.

“However, following the second round of quantitative easing in the US and continued growth in key commodity-consuming countries like China, there is a risk of further price increases in the new year, which could begin to filter through into higher domestic prices.

“Weak demand, both locally and globally, low input costs as well as the strong rand will help to contain price increases of manufactured goods.

Interest rates are expected to remain unchanged throughout next year as domestic growth remains subdued and inflation, despite ticking up slightly, stays well contained. However, further monetary easing is still possible if the rand remains strong, economic growth disappoints again and inflation remains tame.”

An economist at economists.co.za, Mike Schussler said the figure was reasonable. “I was a bit worried that we’d see it flatten out and move up but 6,4% is okay. In fact it’s a bit of good news after a slightly negative CPI number yesterday. However, this doesn’t change the view that rates will remain on hold before going up.” — Reuters, I-Net Bridge

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