PPI at low­est level since Septem­ber 2015

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

SOUTH Africa’s pro­ducer price in­dex (PPI) in­fla­tion in June eased to its low­est lev­els since Septem­ber 2015, dragged lower by a slow­down in food and fuel prices in the pe­riod.

Statis­tics SA (Stats SA) said yes­ter­day that PPI in­fla­tion mod­er­ated to 4 per­cent yearon-year last month from the 4.8 per­cent year-on-year recorded in May and be­low mar­ket ex­pec­ta­tions of 4.4 per­cent.

On a month-to-month ba­sis, from May 2017 to June 2017 the PPI for fi­nal man­u­fac­tured goods de­creased by 0.3 per­cent in June af­ter it rose 0.5 per­cent in the pre­vi­ous month.

Diyanna Slab­bert, an economist at In­vestec, said the stronger rand also helped lower the cost of im­ports of raw ma­te­ri­als and in­ter­me­di­ate goods used in the lo­cal pro­duc­tion process, aid­ing in the lower head­line PPI out­come.

“Both PPI and CPI in­fla­tion is ex­pected to mod­er­ate fur­ther in 2017, aided by lower global oil prices, a mod­er­a­tion in food price in­creases, lower-than an­tic­i­pated elec­tric­ity tar­iffs and a more re­silient cur­rency,” Slab­bert said.

Macroe­co­nomics web­site Trad­ing Eco­nom­ics said pro­ducer prices change in South Africa av­er­aged 5.91 per­cent from 2013 un­til 2017, reach­ing a record high of 8.8 per­cent in April of 2014 and a record low of 2.6 per­cent in Fe­bru­ary of 2015.

Stats SA said main con­trib­u­tors to the change in the an­nual PPI in­fla­tion were the food

South Africa’s pro­ducer price in­dex fig­ure for June

prod­ucts, bev­er­ages and to­bacco prod­ucts group, the coke, petroleum, chem­i­cal, rub­ber and plas­tic prod­ucts seg­ment and the wood and pa­per prod­ucts group.

While the main con­trib­u­tor to the monthly de­crease was coke, petroleum, chem­i­cal, rub­ber and plas­tic prod­ucts group, prices in the elec­tric­ity and wa­ter in­dus­try in­creased 6.2 per­cent to 6.4 per­cent in May.

The min­ing in­dus­try prices de­creased 1.5 per­cent in June af­ter a 3 per­cent slide in May, while pro­ducer prices de­creased 1.4 per­cent in the farm, forestry and fish­ing sec­tor.

In­ter­me­di­ate goods prices rose 2.1 per­cent from the 3.1 per­cent recorded in the pre­vi­ous month.

Marique Kruger, an economist at the Steel and Engi­neer­ing In­dus­tries Fed­er­a­tion of South­ern Africa, said South Africa’s hard-pressed man­u­fac­tur­ers were on the re­ceiv­ing end of the weak econ­omy as there was lit­tle room to pass on cost in­creases.

“This re­flects a fourth con­sec­u­tive year-on-year de­crease, which is in­dica­tive of a lack of de­mand pull fac­tors in the sys­tem. The fact is the econ­omy is very weak and there is just not enough room for man­u­fac­tur­ers to pass on cost in­creases into the mar­ket,” Kruger said.

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