Producer inflation springs an unpleasant surprise
The prospect of a November interest rate cut is vanishing, after the bleak picture painted in Malusi Gigaba's medium-term budget
Producer prices accelerated even faster than expected in September, adding to the growing expectation that the Reserve Bank will not cut interest rates when it meets in November. The producer price index (PPI) for final manufactured goods, considered the headline figure, rose 5.2% in September compared with a year earlier, Statistics SA said on Thursday. That is up from 4.2% in August, and compares with a 5% estimate in a poll by Trading Economics and Investec’s forecast for 4.9%. Investec economist Kamilla Kaplan said on Thursday: "The deterioration in government debt and deficit projections presented in the medium-term budget policy statement substantially heightens the risk of a credit rating downgrade to sub-investment grade. "Rand weakness will lift inflation, which eliminates the scope for any further interest rate cuts in the current cycle." Fuel prices have been a key driver of both producer and consumer inflation in the past couple of months, and Kaplan had earlier flagged ...
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