The Producer Price Index (PPI) eased to 5.5 percent in January, Statistics South Africa (Stats SA) said on Thursday.
Producer inflation eased to 5.5 percent from 5.8 percent in December, a figure which Nedbank economists said was slightly above market expectations.
In January, prices rose sharply, increasing by 1.1 percent, due to higher commodity prices, with the mining and quarrying category rising by 3.3 percent month on month.
The bank said there was risk of further commodity price increases in 2011 because of better global growth prospects, abundant liquidity as well as supply disruptions due to abnormal weather patterns.
It said that the intensification of conflict in the Middle East and North Africa could put further upward pressure on oil prices, at least in the short term.
Of the outlook, the rand remains a key risk for producer inflation. “With the carry trade likely to play a less dominant role this year, upward pressure on the rand is likely to be limited. This implies that higher global agricultural and commodity prices will feed through more quickly into domestic inflation, without the offsetting impact of an appreciating rand.
“Higher international commodity prices, which will filter through to domestic inflation at both the producer and consumer level are likely to play a big role in 2011,” said Nedbank. – BuaNews
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