Producer inflation posts surprisingly sharp slowdown
By Sunita Menon and Tammy Foyn - Jul 27th 2017, 15:48
Production inflation posted a surprisingly sharp fall in June — slowing to 4% year on year, from 4.8% in May.
Investec and Trading Economics had forecast that the producer price index (PPI) rose 4.6% year on year in June.
Compared with May 2017, producer prices fell in June — decreasing 0.3%, after rising 0.5% in May from April.
Food and fuel prices were key factors in the headline PPI outcome.
The easing of the drought in most of SA, and improved agricultural production as a result, has continued to bring down food prices. At 25.17%, the food category makes up the largest portion of the PPI.
Food prices rose 4.7% from a year earlier, slowing from 5.8% in May.
Grain prices fell 15% in June from a year earlier, but meat prices rose 17%. Dairy prices were up 1.9%, fruits and vegetables rose 3.6%, and fish rose 4.6%. Prices of oils and fats fell 3.4%. Prices in the broader category of meat, fish, fruit, vegetables, oils and fats were up 10.2%.
Coal and petroleum products prices were up 2% from a year earlier — slowing sharply from May’s 8.7%.
The main contributors to the annual PPI inflation rate were:
• food products, beverages and tobacco products, which contributed 1.6 percentage points;
• coke, petroleum, chemical, rubber and plastic products, at 0.8 percentage points; and
• wood and paper products, at 0.6 percentage points.
Last week, Reserve Bank governor Lesetja Kganyago announced that interest rates would be cut by 25 basis points, from 7% to 6.75%.
June’s consumer inflation, also released last week, slowed to 5.1% year on year, from 5.4% in May 2017.
If inflation continues to moderate, economists expect another cut in rates at the next meeting of the Reserve Bank’s monetary policy committee (MPC).
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