Rise in factory gate prices eases

Johannesburg - Producer price inflation - or the increase in factory gate prices - slowed to 6.6% year-on-year (y/y) in April, from 7.3% in March, Statistics SA said on Thursday.

"This rate is 0.7 of percentage point lower than the corresponding annual rate of +7.3% in March 2011," Stats SA said in a report.

Producer price inflation (PPI) measures the average changes in prices received by domestic producers for their output. From March 2011 to April 2011, the PPI for domestic output increased by 0.9%.

The lower annual rate in April was driven by decreases in mining and quarrying, basic metals, other manufacturers, beverages, and non-metallic mineral products.These decreases were partially counteracted by increases in the annual rate of change for electricity, products of petroleum and coal, and metal products.

Razia Khan, head of research Africa, Standard Chartered, cautioned "against reading too much into this figure".

"A lot of the good news was the favourable base; 0.9% month-on-month is still a pretty hefty rise, and provides little reason to go complacent on inflation risks," she said.

Consumer inflation edged up slightly to 4.2% y/y in April compared with March, coming in below market expectations, data showed last week.

The Reserve Bank raised its inflation forecast earlier this month and said CPI inflation was likely to pierce its 3% to 6% target band briefly, peaking at 6.3% in the first quarter of 2012, and said it would not hesitate to act on signs that inflation was consistently above the target band.

The central bank has left its repo rate unchanged at 5.5% this year, after reducing it by 650 basis points between December 2008 and December 2010.