PPI slows in November

DECEMBER 19, 2014

The Producer Price Index (PPI) slowed to 6.5% in November, Statistics South Africa (Stats SA) said on Thursday.

“The annual percentage change in the PPI for final manufactured goods was 6.5% in November 2014 (compared with 6.7% in October 2014). From October 2014 to November 2014, the PPI for final manufactured goods remained unchanged,” said Stats SA.

The main contributors to the annual rate of 6.5% were food products, beverages and tobacco products (8% year-on-year and contributing 2.9 percentage points) and metals, machinery, equipment and computing equipment (9.5% year-on-year and contributing 1.4 percentage points).

According to Nedbank economists, producer inflation is likely to continue to decline in the coming months as global energy prices continue to moderate.

The volatility of the rand does however add uncertainty to the inflation trajectory.

“The decision by the Reserve Bank to delay the 'normalisation' of interest rates at the last Monetary Policy Committee (MPC) meeting was probably the correct one, given the collapse in the oil price which has led to a deceleration in inflation numbers. Based on this, it now seems likely that the Reserve Bank will delay its tightening cycle until the second half of 2015, when the US is expected to start hiking interest rates,” said the economists.

At its last meeting of the year last month, the Reserve Bank said the country’s repo rate will remain unchanged at 5.75%. -SAnews.gov.za