Johannesburg - South Africa's producer price index (PPI) registered growth of +0.7% year-on-year (y/y) in December from -1.2% y/y in November, Statistics South Africa (Stats SA) data on Thursday showed.
PPI was also shown to have dropped -0.1% in 2009 from the 14.2% of 2008.
The PPI increased 0.7% on a monthly basis after November's monthly increase of 0.8%.
The PPI was expected to increase at 0.1% y/y according to a survey of 12 leading economists by I-Net Bridge, with forecasts ranging from -0.7% to +0.8% y/y.
Exports were at -6.1% y/y from -11.9% in November.
Imports were at -3.5% y/y from -5.7% the month before.
Stats SA attributed the higher rate in December compared with November to increases in mining and quarrying (-0.7% to +3.6%), and petroleum and coal (-15.8 to 0.0%).
These were counteracted by a decrease in electricity (+20.9 to +19.1).
The jump into double digits in October 2006 was the first double-digit increase since December 2002.
The annual PPI in 2008 increased to 14.2% from a revised 10.9% (10%) seen in 2007 and from 7.7% in 2006. The annual average for PPI in 2005 was 3.1%. PPI was at an average of 0.6% in 2004, 1.7% in 2003 and 14.2% in 2002.
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%.
New weightings were introduced in the January 2008 data, but with no backdating. The new weightings now also make it difficult to use PPI as a leading indicator of CPI.
Economists said that the PPI figures show that the recession is coming to an end.
Annabel Bishop, economist at Investec, said, "Prices at the factory gate inflated by 0.7y/y in December, after falling by 1.2% y/y in November. This is consistent with base effects and
the drawing to the close of SA's recession.
"The ascent in the PPI will likely be particularly sharp this year, coming out close to 2.0% y/y in January and moving to above 6% by the end of
2010, not least due to higher electricity tariffs.
'Rate cut will be beneficial'
"Today's figure is unlikely to change the Sarb's [South African Reserve Bank's] inflation outlook and hence monetary policy stance.
"However, an additional interest rate cut would be beneficial (50 basis points in March), not least to boost confidence, but CPI inflation will run above target in the second half of this year if 35% plus
electricity tariffs are imposed, and this is likely curbing the MPC's [Monetary Policy Committee's] hand."
Nedbank's Carmen Altenkirch said, "Higher commodity prices,
particularly of metals and oil, were the two main factors that caused producer inflation to return for the first time since April 2009.
"Commodity prices have risen by 40% since this time last year, according to an index published by the Economist. However, SA has been partially insulated from this due to the continued strength of the rand.
"Producer inflation is expected to remain relatively subdued during 2010. Weak global and domestic demand for capital goods and industrial materials, due to low levels of investment and construction spending, will contain price increases going forward.
"Eskom's proposed 35% tariff increase and a weaker rand pose the biggest risk to the outlook this year."
Mike Schüssler of Economists.co.za said: "It is the first time in eight months that the PPI is positive. I think it was expected and shows inflationary pressures are slowly coming back.
"It's nothing to worry about at this stage, but we can expect increases in the PPI to continue."
- I-Net Bridge