Bloomberg News

South African Producer Inflation Slows to 10.1% in November

December 16, 2011

(Updates with comment from Nedbank in fourth paragraph.)

Dec. 15 (Bloomberg) -- The cost of goods leaving South African factories and mines rose at a slower pace in November than a month earlier, giving the central bank room to leave interest rates unchanged.

The producer-price inflation rate fell to 10.1 percent from 10.6 percent in October, the first decline in seven months, Pretoria-based Statistics South Africa said on its website today. The median estimate of 14 economists surveyed by Bloomberg was 10.6 percent. Prices rose 0.2 percent in the month.

The Reserve Bank has kept its benchmark lending rate unchanged at a 30-year low of 5.5 percent this year to support growth in Africa’s biggest economy, even as price pressures increased. Growth stalled at 1.4 percent in the third quarter, little changed from the almost two-year low of 1.3 percent in the previous three months.

“With domestic growth under threat, the Reserve Bank will probably opt to keep interest rates unchanged until the end of 2012,” Nedbank Group Ltd., South Africa’s fourth-largest lender, said in a note to clients. While lower commodity prices and weakening demand should contain producer prices in 2012, further depreciation in the value of the rand will keep factory inflation “firmly in double-digit territory next year,” it said.

Consumer-price inflation climbed to 6.1 percent in November to breach the top end of the central bank’s 3 percent to 6 percent target range for the first time in 22 months, as higher fuel prices and a weaker rand boosted costs.

The rand has slumped 21 percent against the dollar this year, the most of 16 major currencies tracked by Bloomberg. It strengthened 0.4 percent to 8.4038 per dollar as of 1:55 p.m. in Johannesburg.

--With assistance from Simbarashe Gumbo in Johannesburg. Editors: Gordon Bell, Alastair Reed

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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