SA producer-price inflation accelerates in August

Producer price inflation rose to to 6.7% in August. (David Harrison, M&G)

Producer price inflation rose to to 6.7% in August. (David Harrison, M&G)

The cost of goods leaving South African factories rose at a faster pace in August than the previous month, adding to pressure on consumer prices.

Producer-price inflation for final manufactured goods quickened to 6.7% from 6.6% in July, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of seven economists was 6.5%. Prices rose 0.8% in the month.

 

The Reserve Bank last week held its benchmark repurchase rate at 5% for the seventh consecutive meeting, saying it faces conflicting policy choices with slowing economic growth and consumer-price inflation that’s set to remain "uncomfortably close" to the 6% upper end of the bank’s target band.

 

Inflation accelerated to 6.4% in August, exceeding the target for a second month.
While the central bank said the rate will drop into the target by the end of the year, it raised price forecasts for 2014 and 2015.

 

Reserve Bank Governor Gill Marcus said last week risks to inflation because of a weaker rand remain high. While the currency has rebounded from a four-year low against the dollar reached on August 28, it’s lost 15% this year, making it the worst performer among 16 major currencies tracked by Bloomberg.

 

The economy is forecast to expand 2% this year, according to the Reserve Bank, which will be the slowest pace since a 2009 recession, as strikes in mining and manufacturing and sluggish global demand strain exports. – Bloomberg

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