Bloomberg News

South African Producer Inflation Accelerates on Oil, Food

June 30, 2011

(Updates with economist comment in third paragraph, rand in eighth.)

June 30 (Bloomberg) -- The cost of goods leaving South African factories and mines rose at a faster pace in May than the previous month, reflecting a rise in the price of food, electricity, oil and other commodities.

Producer prices increased an annual 6.9 percent after gaining 6.6 percent in April, Pretoria-based Statistics South Africa said on its website today. The median estimate of 14 economists surveyed by Bloomberg was 7.1 percent. Prices rose 0.4 percent in the month.

“Commodity prices have corrected slightly off earlier highs, which should help to contain producer inflation in the months ahead,” Carmen Altenkirch, an economist at Nedbank Group Ltd. in Johannesburg, said in e-mailed comments. “However, base effects and the return of some pricing power to producers should push prices at the manufacturing level up modestly.”

The price of crude fell 9.9 percent in May on the New York Mercantile Exchange, trimming its 12-month gain to 39 percent. Higher factory-gate prices may feed through to consumer inflation, placing pressure on the central bank to raise interest rates from a 30-year low.

Consumer inflation accelerated to 4.6 percent from 4.2 percent in April. The central bank’s inflation target range is between 3 percent and 6 percent.

Mixed Signals

Reserve Bank Governor Gill Marcus left the benchmark interest rate unchanged at 5.5 percent on May 12, while warning that the outlook for inflation had deteriorated. The bank expects inflation to average 5.1 percent this year and 6 percent in 2012, with a temporary breach of its target in the first quarter of next year.

The bank’s monetary policy committee is due to announce its next interest-rate decision on July 21. South Africa’s economic data is giving mixed signals about what interest rate is needed, Marcus said in Pretoria today.

The rand traded at 6.7888 per dollar at 12:25 p.m. in Johannesburg, little changed from before the release of the inflation data and stronger than 6.8259 late yesterday.

Bonds advanced for the first day in three. The 13.5 percent notes due 2015 jumped 17 cents to 121.41 rand, driving the yield down five basis points, or 0.05 percentage point, to 7.45 percent. The 6.75 percent securities due 2021 climbed 34 cents to 89.26 rand.

--Editors: Gordon Bell, Philip Sanders

To contact the reporter on this story: Mike Cohen in cape Town at

To contact the editor responsible for this story: Andrew J. Barden at

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