THE tariff increase energy regulator Nersa granted Eskom yesterday will drive the producer price index, which is at its lowest since 1970, faster from its negative levels.

Inflation at the factory gate, as measured by Stats SA's PPI, was down 3,0percent year-on-year in May from a 2,9percent year-on-year increase in April.

Economist Chris Hart said the PPI had not been as low as May's -3percent since 1970.

Although this is the ninth consecutive decrease in the PPI headline number, May's drop is the first time since the end of 2003 that the PPI has posted a negative year-on-year rate.

Exported commodities dropped sharply to -6,0percent year-on-year from -2,7percent in April. Imports also moved to a low -16,7percent year-on-year in May, from -14,7percent the month before.

Stats SA attributed the lower rate in May compared with April to decreases in petroleum products, electricity and coal.

Mike Schussler said the PPI figure was "one of the few nice surprises" in recent months.

"It shows that the profit margins in South Africa are improving on the side of consumers and retailers."

Schussler said that while this was good for consumers, these PPI figures were "bad news for producers".

Dawie Roodt said PPI was a smaller basket and only consists of goods and not services.