SA factory gate prices ease

Johannesburg  - Statistics South Africa said on Thursday producer inflation, which represents domestic output, slowed to 8.9% year-on-year (y/y) in January from 9.8% in December.

Citadel economist Salomi Odendaal said: “It is in line with the general movement of commodities - there has not been a repeat of the sharp increases we saw a year ago and that is coming through to the PPI (producer price index), especially as far as food prices are concerned.

“Although there seems to be some upward pressure on the manufacturing sector which can be expected, the risk for CPI (consumer price inflation) headline inflation is much more from the services side where our wage costs can lead to a price increase.”

Standard Bank economist Shireen Darmalingam said the easing backs their view that interest rates are likely to be kept on hold at the next monetary policy committee meeting in March.

Peter Attard Montalto, emerging market analyst at Nomura, said a stronger rand was partly to blame.

Consumer inflation inched up to 6.3% y/y in January - above the top end of the Reserve bank’s 3-6% for the third month in a row.

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.
 
The central bank has left its repo rate unchanged at 5.5% since 2011, after reducing it by 650 basis points in the two years to end-2010.