Economists cheer PPI data
July 30, 2009
South Africa's producer price index (PPI) registered deflation of -4.1% year-on-year (y/y) in June from -3.0% y/y in May, Statistics South Africa (Stats SA) data on Thursday showed.
This is the tenth consecutive decrease in the producer price inflation headline number.
The PPI increased 1.5% on a monthly basis after May's monthly decrease of 1.1%.
The PPI was expected to have decreased at 3.4% y/y according to a survey of leading economists by I-Net Bridge, with forecasts ranging from -2.1% to -5.1% y/y.
Exports were at -9.7% y/y from -6.0% in May. Imports were at -17.9% y/y from -16.7% the month before.
Carmen Altenkirch, senior economist at Nedbank, said: "More good news on the inflation side - PPI came out lower than market expectations.
"The monthly increase was probably due to the sharp increase in oil prices we saw last month as well as the upward trend in international metal prices.
"But due to base effects, these categories are still falling on a year-on-year basis.
"The trend that has emerged over the last couple of months is likely to have been maintained, with moderating food inflation at the producer level as well as a slowdown in the rate of inflation for goods used in construction - due to the general weakness in both local and global investment spending.
"In terms of interest rates - PPI and CPI figures certainly point to moderating inflationary pressures and will hopefully give the Sarb sufficient leeway to cut rates later this year."
Doret Els, economist at Quantum Asset Management, said: "We expected -3.7%. PPI is very exposed to commodity prices.
"Those came off dramatically towards the end of last year and that has added to the producer price deflation.
"Also, producer inflation does not include services inflation and that gives more room for producer inflation to come down more quickly than on the consumer side."
Mike Schussler, director at Economists.co.za, said: "It shows there is still commodity price deflation, but not on the services side.
"I think we will see lower food prices so that's good news."
Annabel Bishop, economist at Investec: "PPI inflation came out much lower than expected in June, recording the second month of deflation since December 2003.
"We continue to believe the Sarb will cut interest rates by 50bp in August.
"The release of the Q2.09 GDP figures are likely to show the economy contracted by more than the authorities expect, we forecast a Q2.09 figure of -4.2% qqsaa, if not closer to Q1.09's outcome.
"The larger-than-expected fall in the PPI on the year was due to greater moderation in price pressures than expected generally, and in the food and oil/petroleum categories costs fell or increased negligibly on the month, as the recession continued in Q2.09."
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