PRODUCER prices rose faster-than-expected in January, data showed yesterday, countering softer consumer inflation and dimming chances of an interest rate cut next month.

PRODUCER prices rose faster-than-expected in January, data showed yesterday, countering softer consumer inflation and dimming chances of an interest rate cut next month.

Stats SA said producer inflation quickened to 2,7percent year-on-year - a nine month high - from 0,7percent in December, beating forecasts of a 1,9percent increase, largely due to rising commodity prices.

Producer prices rose 1,3percent on the month.

Analysts said the data may reduce the chances of an interest rate cut in March, that had been stoked by a surprising slowdown in consumer inflation and a less-than-expected power price increase that pointed to a better outlook for inflation.

"It's a bit higher than we expected. PPI is now firmly positive after being in deflation for quite a while," Citadel economist Salomi Odendaal said.

"At this stage I think it's a figure that's negative for the inflation outlook. We still expect inflation to be in the target for the rest of the year."

Consumer inflation eased to 6,2percent year-on-year in January, data showed on Wednesday, edging back towards the central bank's 3 to 6percent band.

The Reserve Bank expects it inside the range by the second quarter, but economists now think it may happen sooner.

Producer prices had been in decline for most of last year when the economy slumped into its first recession in 17 years, but inflation has returned with output recovering.

Official data this week showed the economy grew by 3,2percent quarter-on-quarter and annualised in the last three months of last year.

Stats SA said exported commodities inflation stood at -3,8percent year-on-year in January compared with -6,1percent the month before, while imported commodities inflation was at 2,6perent year-on-year from -3,5percent previously. - Reuters