Producer price inflation data,
PRICES of manufactured goods at the factory gate fell to 3.4 percent in January from 5.8 percent in December.
This was better than market expectations of 4.7 percent and augurs well for headline consumer inflation, which is at 4.4 percent.
Statistics SA (Stats SA) said yesterday that the rate of increase in the rise of producer price inflation (PPI) was continuing a falling trend.
However, analysts warned that the monetary policy committee (MPC) of the Reserve Bank was unlikely to read too much into the-stronger-thanexpected figures as the risks to the economic outlook still remained on the downside, given limited power and other capacity locally and an uncertain economic environment globally. PPI hit a peak of 8.8 percent in April 2014.
Stats SA said the falling prices for coal and petroleum products continued to drive producer inflation down, but this was offset by higher prices for tobacco, beverages and food products, which placed upward pressure on inflation.
The Nedbank Economic Unit said the economy should fare better in 2015 off the low base of 2014. It said consumer spending was forecast to accelerate as lower fuel prices and easing inflation supported disposable income and interest rates remaining steady for much of the year.
“This, along with the low base of 2014, is expected to outweigh the negative impact of load shedding, lower international commodity prices and subdued global demand on exports. On balance, we expect gross domestic product growth of about 2.5 percent in 2015.”
The prices for final manufactured coal and petroleum products were down 29.4 per- cent in January compared with January 2014.
NKC Research analyst Bart Stemmet said much of the decline in the PPI was due to lower international fuel prices.
“In fact, the petrol sub-index was down 34 percent year on year in January. However, local petrol prices are set to increase by almost R1 a litre next month, while some 80.5c a litre in higher fuel levies will come into effect. As such, we will start to see price pressures edge up again over the next few months.”
Azar Jammine, the chief economist at Econometrix, said one should bear in mind another factor contributing towards the reduction in PPI had been the steep depreciation of the euro and yen against many currencies in recent months.
“This will have helped reduce the cost of imported goods from Europe and Japan. This is somewhat ironic, given the fairly significant fall of the rand against the dollar over the past six months, from around R10.50 to R11.50.”
He said, nonetheless, it would be dangerous to be overly excited by these latest figures.
“The PPI rate may well kick back upwards in months to come on the back of a fairly significant rally in international crude oil prices and a sharp increase in domestic maize prices as a result of drought conditions.”
The falling prices for coal and petroleum products continued to drive producer inflation down.