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SA’s PPI below expectations in October


South Africa’s annual producer price inflation slowed unexpectedly in October, official data showed on Thursday, mainly driven by the strength of the rand currency.

Statistics South Africa said PPI slowed to 6,4% year-on-year in October from 6,8 % in September, compared with a 6.8 percent consensus in a Reuters poll.

On a monthly basis PPI, which represents domestic output, fell by 0,4% from, 4,1% previously, compared with expectations of, 0,1%.

Exported commodities inflation also braked to 6,6% year-on-year in October from 7,6% the previous month, while on the imported side, inflation quickened to 1,3% year-on-year from 0,7%.

PPI comes a day after data showing consumer price inflation quickened to 3,4 % in October, which left analysts divided on whether the central bank will cut interest rates again at the next meeting of the Monetary Policy Committee in January.

The South African Reserve Bank cut the repo rate by 50 basis points last week to 5,5%, bringing cumulative reductions since December 2008 to 650 basis points.

The rand has gained over 26 percent since the beginning of last year, helping to moderate factory gate prices.

Colen Garrow, an economist at Brait, said the PPI print supported the argument for further monetary easing.

“This PPI is still supporting the view that there could be further monetary easing in the New Year . . . depending on how the rand peforms and the growth outlook that we will see in the monthly data,” he said.

The rand was trading at 7,0712 against the dollar at 1001 GMT, from 7,0485 before the data was released. The yield on the 2015 government bond was unchanged at 7,195.

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