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Factory prices pose no inflation risk

Jul 29 2010 14:14

Company Data

Nedbank Capital [JSE : NED]

Last traded R159.00
Change R-1.00
% Change -0.63%
Cumulative volume 664,411
Market cap R80.68bn

Last Updated: 03/02/2012 at 19:33. Prices are delayed by 15 minutes. Source: McGregor BFA

 

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Johannesburg - South Africa's producer price inflation (PPI) is expected to continue to rise over coming months, but it will not have immediate implications for consumer price inflation.

PPI quickened to 9.4% year-on-year (y/y) in June from 6.8% in May, official data showed on Thursday.

Statistics South Africa said on a monthly basis producer inflation, representing domestic output, was at 4.0% compared with 0.2% in May.

Exported commodities inflation stood at 7.0% y/y in June compared with 4.8% the month before, while imported commodities inflation slowed to 3.7% y/y from 6.5% previously.

A Reuters poll last week showed the PPI was expected to quicken to 7.4% y/y and to 2.4% month-on-month.

"The rise was mainly due to a seasonal increase in the price of electricity," said Nedbank Group [JSE:NED] economist Carmen Altenkirch.

"Although PPI is expected to continue to rise over the coming months, it has no immediate implications for our positive consumer inflation outlook, as it is being driven by commodity inflation," she said.

Statistics SA data on Wednesday showed CPI consumer inflation, monitored by the Reserve Bank for monetary policy, slowed to 4.2% y/y in June, staying in a 3% to 6% target band and leaving the door open for another rate cut before year-end.

The argument for lower rates was further bolstered earlier on Thursday by Reserve Bank numbers showing demand for credit from South Africa's private sector grew at a slower pace than anticipated in June, as companies and households struggled to recover from last year's recession.

The Reserve Bank slashed rates by 550 basis points between December 2008 and March this year to help rekindle economic growth, but has left the key repo unchanged at 6.5% at its last two policy meetings.

"We still believe the risks to consumer inflation and interest rates are strongly biased downwards," said Barnard Jacobs Mellet Holdings [JSE:BJM] economist Elna Moolman.

 - Reuters

 
 
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