Factory gate inflation rose by 16,8percent in June, slightly less than economists' expectations.
The producer price index (PPI) rose 2,6percent on a monthly basis after May's monthly increase of 4,9percent, but economists had expected it to jump to 17,4percent year on year in June from May's 16,4percent.
Although producer inflation was lower than the market's expected rise, economists believe the Reserve Bank will still hike interest rates come August 14.
"That's a nice surprise. But I still got a feeling that PPI will still go up. The fact of the matter is 16,8percent is still quite a big number for PPI and it shows that inflation hasn't peaked, so my argument is weighted on a rate hike next month," said T-Sec economist Mike Schussler.
Danelee van Dyk, a Standard Bank economist, agreed: "This confirms our expectation that the Reserve Bank will hike interest rates yet again in August, to limit the spillover effects into inflation expectations, higher wage demands and prices of processed consumer goods."
Food at the manufacturing level rose by 19,4percent year on year in June, marginally higher than the 19,1percent in May.
"This is much higher than the 2,0percent year on year recorded by food at the agricultural level. This seems to correlatewith the CPI food data, which indicates that consumer prices of processed foods rose by 21,3percent in June, while unprocessed foods rose by only 13,2percent," said Efficient Group economist Fanie Joubert. - Staff Reporter