Factory gate prices continue to rise

Johannesburg - Statistics South Africa said on Thursday that producer inflation, which represents domestic output, quickened more than expected to 10.5% year-on-year (y/y) in September from 9.6% in August.

The market was expecting PPI to accelerate to 10.35% year-on-year, and it was seen slowing to -3.45% on a monthly basis.

Analysts said producer inflation is likely to edge up further.

Nedbank economist Carmen Altenkirch said lower commodity prices in the months ahead as well as subdued global growth are expected to put downward pressure on prices next year.

“Deteriorating economic prospects will make businesses, both locally and abroad, reluctant to invest in additional capacity. This should contain price increases of manufactured goods as well as machinery. Producer and consumer inflation will continue to edge higher in the coming months," she said.
 
Colen Garrow, economist at Brait, said: "It's not really a nice number but it won't have any implications for monetary policy. Focus is on CPI (the consumer price index) and GDP (gross domestic product)."

The consumer price index rose to 5.7% y/y in September compared with August, but its link with the PPI, which is dominated by commodities, has been weakened.

The central bank has left its repo rate unchanged at 5.5% so far this year after reducing it by 650 basis points in the two years to end-2010.