Johannesburg - South African producer inflation quickened
more than expected to 5.2% year-on-year in October from 4.2% in September,
Statistics South Africa said on Thursday.
On a month-on-month basis, prices at the factory gate
rose by 0.6% in October after a 4% drop
The median consensus of economists polled by Reuters was for
PPI to quicken slightly to 4.8% year-on-year and 0.15% on a month-on-month
Said Annabel Bishop, group economist at Investec: "The
key positive price inflation contributors on the month were agricultural
prices, mining and quarrying, products of petroleum and coal and food at the
"We still do not expect the South African Reserve Bank
(Sarb) to cut interest rates in 2013.
"CPI inflation is the relevant measure and it is likely
to rise above 6.0% next year, potentially only falling within the inflation
target range in H2 2013, although it will still likely be close to the upper
limit during this period.
Anisha Arora, emerging market analyst at 4Cast said:
"South African PPI rebounded from last month's plunge.
"However this is an unsurprising increase given that
last month we saw a somewhat uncharacteristic 4.0% month-on-month fall.
"Exported commodities PPI fell for the third
consecutive month while imported PPI climbed by a firm 8.0% year-on-year with
the recent rand weakness.
"The current state of the domestic economy is unlikely
to be supportive of a strong rand retracement in the short term and looking
ahead imported goods are still expected to enter manufacturing and factories
more expensive than goods leaving the economy.
"In turn this will be yet another cost for consumer
goods, inflating CPI down the line which will limit the SARB's scope for policy
Meanwhile Elize Kruger, Kadd Capital economist said:
"It's higher than expected. We're seeing a huge increase in food prices -
7.8% month-on-month in agricultural food prices with an actual shocking
increase of 29.3% in vegetable prices in a month is quite a spike.
"We see some more food price pressures building in the
pipeline that are likely to impact on higher food prices at the consumer level
in the next few months."
Absa Capital economist Ilke van Zyl said: "The reasons
for the rise are food prices and the weaker exchange rate, but also the low
base that was created last month. We had a steep fall in mining and quarrying
prices that wasn't repeated.
"But overall, if you even look at the credit figures
out this morning where household credit rose to 9.3% year-on-year, couple that
with the low electricity consumption figures that came out, shows you that high
liquidity insists in the system coupled with lower supply, will shape the
"We expect the PPI to move upwards or sideways at best
but probably not decline or go into a downward phase as we saw previously this
The rand firmed slightly to R8.7650 against the dollar at
10:00 GMT, from R8.7735 before the data was released at 09:30 GMT while the
yield on the 2015 bond dropped to 5.43% from 5.445% beforehand.
Statistics South Africa plans sweeping changes to PPI that
will make it a more relevant indicator for consumer prices from 2013.
For now, the index is dominated by commodities and tends to
move in tandem with those prices, with little pass-through to consumer
Lower mining production and weaker commodity prices have
resulted in a slower rise in prices.