Producer Price Index slows to 2.9 percent

By Mandisi Tyulu
28 May 2009

The Producer Price Index for April slowed to 2.9 percent, from 5.3 percent in March, Statistics South Africa reported on Thursday.
Nedbank economist Carmen Altenkirch said that the market was expecting the PPI to come in at 2.5 percent.

“The main reason for the 2.9 percent drop is because of a decline in electricity prices and agricultural prices month on month falling sharply,” said Ms Altenkirch. According to Stats SA, the price indices for other manufacturers decreased by -02. percentage points, agricultural products -0.2 e percentage points and electricity is 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.

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