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Factory gate prices ease

Johannesburg - Statistics South Africa said on Thursday that producer price inflation (PPI), which represents domestic output, slowed to 5.5% year-on-year (y/y) in January from 5.8%  in December.

The PPI measures price inflation at SA's factories, mine and farms.

For 2010 as a whole, the PPI came in at 6.0% compared with 0.1% in 2009. Commodity prices continue to be the major driver of rising producer inflation.

The continuing rise in the inflation rate of input costs as measured by the PPI is a risk to the inflation outlook in 2011.

Consumer inflation accelerated to 3.7% y/y in January from 3.5% in December, data showed last week.

The PPI figure was roughly in line with analysts' expectations.

Salomi Odendaal, economist at Citadel, said that until recently the strong rand had cushioned SA against higher prices.

"The strong rand, until recently, has (held back) the implications of higher commodity prices, although I think one can expect higher global commodity prices to filter through into PPI.

“At the moment we still see there’s not much pressure on inflation from the manufacturing sector, but one can expect some pressure from especially food and energy prices in the future," she said.

Investment Solutions economist Chris Hart said the figure reflected inflationary pressures.

"We are on an upward cycle, given rand weakness in January and higher oil prices," he said. 

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