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PPI slows in February

Nedbank Economic Unit: Sarb likely to keep rates on hold throughout most of 2015.

Statistics South Africa says that the annual percentage change in producer price index (PPI) for final manufactured goods was 2.6% in February 2015 (3.5% year-on-year in January).According to a flash comment by Nedbank’s Economic Unit the market had expected a 2.9% annual rate. 

From January to February the PPI increased by 0.4%. 

The main contributors to both the annual and monthly increase were food products, beverages and tobacco products.

Nedbank says: “Producer inflation is expected to increase rapidly in the coming months on the back of higher food and fuel prices. The ‘food products’ as well as the ‘coal, petroleum, chemical, rubber and plastic products’ categories together account for 45.8 % of the producer inflation basket. A large reason for the fall in producer inflation this year has stemmed from lower petroleum prices. However, the expectation is for both petroleum and food prices to increase in the coming months and this will put upward pressure on producer prices.

“The February consumer and producer inflation numbers should have very little impact on today’s Monetary Policy Committee meeting decision as the Reserve Bank is forward looking. While domestic growth is expected to improve from last year’s 1.5 %, growth this year will remain relatively muted. This, together with consumer inflation that is forecast to end the year just below the Reserve Bank’s upper target range, will probably persuade the SARB to keep rates on hold throughout most of 2015, with the first rate hike penciled in for November 2015, but this will be highly dependent on the trajectories of the rand and the oil price.”

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