PPI climbs to 9.4%

The Producer Price Index (PPI) rose to 9.4 percent in June, 2.6 percent higher than the 6.8 percent recorded in May, according to Statistics South Africa (Stats SA).

Some experts had predicted that PPI, which is the cost of goods leaving factory gates and mines, would come in at 7.7 percent year on year in June.

Statistics South Africa (Stats SA) said on Thursday the increase could be explained by increases in the annual rate of change in price indices for agriculture, mining and quarrying as well as food and manufacturing among other things.

Nedbank economist, Carmen Altenkirch, said the sharp increase in PPI was mainly due to a seasonal increase in the price of electricity. "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.

She added that price increases for manufactured goods would remain subdued.

Commenting on yesterday's announcement that the Consumer Price Index (CPI) for June slowed to 4.2 percent, Altenkirch said:

"The better-than-expected consumer inflation figure increased the chance that the South African Reserve Bank may decide to cut interest rates at the next meeting, particularly if the rand continues to strengthen." - BuaNews