PPI slows to 2.9%

Nedbank economist Carmen Altenkirch told BuaNews that the market was expecting the PPI to come in at 2.5%.

“The main reason for the 2.9% drop is because of a decline in electricity prices and agricultural prices month on month falling sharply,” said Altenkirch.

According to Stats SA, the monthly decrease of 0.2% in the PPI for domestic output is mainly due to monthly contributions from decreases in the price indices for other manufactures (-0.2 percentage points), agricultural products (-0.2 percentage points) and electricity (at -0.1 percentage point).

She however added that it was surprising to see that prices for metal products increased as commodity prices were declining.

According to Stats SA, the price indices for metal products increased by 0.2 of a percentage point.

The Reserve Bank's Monetary Policy Committee (MPC) is expected to make its decision on interest rates this afternoon.

Altenkirch predicted that the Bank will cut interest rates. This follows from data released on Tuesday that the country was now in a recession.

South Africa's Gross Domestic Product in the first quarter of 2009 contracted by an annualised 6.4%.

The contraction is the second in a row since the last quarter of 2008 that contracted by 1.8%. According to economists, two consecutive quarters of negative growth means an economy is technically in recession.

Article published courtesy of BuaNews