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Send  Print  Share  RSS  Twitter  28 Jan 2010

Actual 0.7% y/y (0.7% m/m), forecast 0.4% y/y, previous -1.2% y/y

 
Prices at the factory gate inflated by 0.7y/y in December, after falling by 1.2% y/y in November. This is consistent with base effects and the drawing to the close of SA’s recession.
The ascent in the PPI will likely be particularly sharp this year, coming out close to 2.0% y/y in January and moving to above 6% by the end of 2010, not least due to higher electricity tariffs.
Today’s figure is unlikely to change the SARB’s inflation outlook and hence monetary policy stance. However, an additional interest rate cut would be beneficial (50bp in March), not least to boost confidence, but CPI inflation will run above target in the second half of this year if 35% plus electricity tariffs are imposed, and this is likely curbing the MPC’s hand.
Annabel Bishop
Investec Group Economics
Investec Ltd

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