Bloomberg News

South Africa Producer-Price Inflation Slowed to 4.9% in May (1)

June 27, 2013

The cost of goods leaving South African factories rose at a slower pace in May than the previous month, easing pressure on the Reserve Bank to raise interest rates.

Producer-price inflation for final manufactured goods slowed to 4.9 percent from 5.4 percent in April, Statistics South Africa said on its website today. The median estimate in a Bloomberg survey was 5.2 percent. Prices rose 0.3 percent in the month.

“The price pressure in respect of other consumer goods remains reasonably tame,” Elna Moolman, Johannesburg-based economist at Macquarie Group Ltd., said in a note to clients. That “would arguably support the SARB’s comments in recent speeches that the pass-through from rand weakness might be somewhat shallower than usual,” she said.

The upside risks to inflation from a weaker rand don’t automatically imply the benchmark rate will be increased because of slow economic growth, Governor Gill Marcus said yesterday. Price increases are limiting the room the Reserve Bank has to cut lending rates to boost a slowing economy, she said. The central bank kept the repurchase rate at 5 percent last month.

The rand has dropped 16 percent against the dollar this year, the worst of the 16 major currencies tracked by Bloomberg. The consumer inflation rate rises as much as 2 percentage points for every 10 percent the rand drops, Marcus said last month.

The rand gained 0.6 percent to 10.0545 per dollar at 11:55 a.m. in Johannesburg.

To contact the reporter on this story: Andres R. Martinez in Johannesburg at amartinez28@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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