Producer price inflation for domestic output spiked 7.4% in June 2011 from the comparable period in 2010, Statistics South Africa announced on Thursday.
The increase was due to an annual surge in PPI in the electricity, mining and quarrying, and food manufacturing sectors in June 2011 from May 2011.
This was counteracted by a decrease in annual PPI for agriculture and basic metals for the same period.
The biggest change in PPI during this time was in the mining and quarrying and basic metals sectors, which increased 3% and decreased 8.7% respectively.
Month-to-month, domestic output PPI increased 4.4% from May 2011 to June 2011.
Inflation pressures
The figures indicate a moderate increase in the cost of producing goods domestically; however an economist felt the increase not to be a great threat to inflation or to provide impetus for a repo rate increase by the South African Reserve Bank (SARB).
“It paints a very bearish view for inflation which we see remaining above the reserve bank’s target band of 3% to 6% throughout 2012,” Monale Ratsoma, chief economist at Thebe Securities, told the Mail & Guardian.
The SARB’s monetary policy committee has left rates unchanged at 5.5% at its last four policy meetings, following a two-year cycle of lowering which led to 6.5% being lopped off the figure.
The level is the lowest since 1962.
Although inflation is seen to be in an upward cycle moving towards SARB’s target ceiling of 6%, Ratsoma was candid about the possibility of an imminent repo rate increase by SARB.
“If inflation remains below 7% I would not imagine a rise in interest rates before the middle of next year,” he said.