INFLATION at South Africa’s factories was again steady in December compared with the same period in 2011, suggesting benign producer price pressures.
Inflation as measured by the producer price index (PPI) remained at 5.2% year on year last month— the same level as in October and November, and well below consensus estimates for a 5.5% increase.
Higher prices for mining and quarrying, other manufactures‚ nonelectrical machinery and equipment were counteracted by decreases in food at manufacturing‚ agriculture‚ and basic metals.
The latest producer inflation figures bode well for consumer inflation.
"Most importantly in terms of the read-through to consumer inflation‚ food inflation was very well behaved and contained … with grain and meat prices falling at the agricultural and manufacturing levels," Renaissance Capital economist Elna Moolman said.
During the month itself, PPI fell 0.1%, mainly due to decreases in the price indices of mining and quarrying and electricity.
These decreases were partially counteracted by increases in the price indices of products of petroleum and coal, and chemicals and chemical products.
Despite the contained producer inflation, forecasts are for increases in coming months.
"The December (reading) was lower than expected‚ but the weak rand exchange rate will (affect) the PPI numbers further down the line," Standard Bank economist Shireen Darmalingam said.
In 2012‚ the average PPI for domestic output was 6.2% compared with an annual increase of 8.4% in the average PPI (domestic output) in 2011.