The cost of goods leaving South African factories rose at a slower pace in February than the previous month, giving the Reserve Bank room to keep interest rates at a 30-year low to stimulate the economy.
Producer-price inflation for final manufactured goods slowed to 5.4 percent from 5.8 percent in January, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 10 economists was 5.6 percent. Prices rose 0.6 percent in the month.
The Reserve Bank “is very concerned about growth and for that reason they won’t put rates up while gross domestic product is on the backfoot,” Colen Garrow, chief economist at Meganomics, said in a phone interview from Johannesburg.
The central bank last week held the benchmark repurchase rate at 5 percent, the lowest level in more than 30 years, as inflation pressures and a weaker rand prevented it from stimulating the economy. The rand has dropped 8.9 percent this year against the dollar, the worst performer among the 16 major currencies tracked by Bloomberg, boosting import costs.
The rand gained 0.1 percent to 9.2559 per dollar at 11:46 a.m. in Johannesburg. The yield on the rand debt due in March 2021 dropped 6 basis points to 6.53 percent.
Reserve Bank Governor Gill Marcus has said that the rand and rising food and fuel prices are the biggest threat to inflation. Consumer-price inflation quickened to 5.9 percent in February, near the top of the bank’s target of 3 percent to 6 percent. The economy expanded 2.5 percent last year from 3.5 percent in 2011 as mining strikes and waning demand from Europe for manufactured goods cut exports.
South Africa reduced the number of items in the basket used to calculate PPI to 273 from 800 and now publishes separate indexes for agriculture, mining, electricity and intermediate manufactured goods starting in January. The steps were taken to bring the index in line with international standards, the agency said.
Producer prices for electricity rose 13 percent in February from a year ago, mining increased 6 percent, intermediate manufactured goods climbed 6 percent and agriculture gained 1.2 percent.
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