Johannesburg - The increase in South Africa's producer price index (PPI) is expected to have receded in September to 18.1%
year-on-year (y/y) from the dizzying 19.1% y/y seen in August, a survey by I-Net Bridge has found.
This will be the first decrease seen in producer prices in just under a year. The last time a decrease was seen was in November 2007 when it dipped from 9.5% in October to 9.1% y/y in November. Since then, it has been one-way traffic to debilitating new highs.
Forecasts among the ten leading economists ranged from as low as 14.4% y/y to 20.4% y/y, with only one forecaster expecting a rise above the August level and one expecting the level unchanged.
The fuel decrease in September is seen as the major reason for the lower expectations.
While electricity tariffs also drop on the month due to the adjustment to summer rates, this decline will be limited on an annual basis after increases of over 30% were seen in July and August.
Agricultural food prices are expected to remain cooler after striking just 2.3% in August, but analysts are still looking for signs of easing in food at the manufacturing level.
Other upside threats remain on the mining and quarrying and basic metals and the chemical products fronts, however.
Rand raising alarm bells
The weak rand of late also raises some alarm bells for cost inputs going forward.
The jump into double digits in producer inflation in October 2006 was the first double-digit increase since December 2002. Since then only seven months have witnessed producer inflation back in single digits. September will be the tenth month in a row that PPI has been in double digits since the 9.1% recorded
in November last year.
PPI was at 9.3% a year ago, with the lower base in the last half of last year set to remain in place until December when it struck 10.3%.
The annual average for PPI in 2007 was 10.0% from the 7.7% recorded in 2006 and from 3.1% in 2005, and compared with an average of only 0.6% in 2004 and 1.7% in 2003.
The 2004 average was the lowest since 1959, when there was no change in producer prices. The lowest annual consumer inflation in the post-1945 period was also in 1959 at 1.1%.
Statistics South Africa will release the data at 11:30 on Thursday, October
30.
The producer price index is now based on an updated set of weights, as well as the prices of South African output, whether the output is sold in the domestic market or exported. The reweighting has resulted in the metals, minerals and oil components receiving heavier weightings, which was a big
factor behind some of the higher outcomes from May.
- I-Net Bridge