Lower PPI must still filter to consumers

Zweli Mokgata

Zweli Mokgata

Prices at the factory gate slowed sharply in February, strengthening calls for more aggressive rate cuts.

But economists warned that consumers might not immediately benefit from the lower producer price inflation (PPI) if firms were slow to adjust their selling prices.

Statistics South Africa said PPI, representing domestic output, slowed from 9,2percent year on year in January, to 7,3percent year on year last month.

The figure surprised economists who were caught off guard by Wednesday's figures, which showed higher-than-expected February consumer inflation.

Danelee van Dyk, head of South Africa research at Standard Bank, said: "The decline in prices of agricultural food and basic metals accounted for the bulk of the decline.

"The moderation in factory gate inflation will continue over the next few months, with high base effects from last year expected to take effect."

All sectors of industry experienced higher prices except for mining and quarrying and petroleum and coal products, which showed negative growth as a result of plummeting resource prices.