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The SA Daily 14 December 2018

PPI coming off peaks

  • Yesterday, local data showed that the producer price index (PPI) for November came in line with Bloomberg consensus expectations, moderating slightly to 6.8% y/y from 6.9% y/y in October.
  • Excluding petroleum-related products, PPI inflation moderated to 3.9% y/y from 4.2% y/y in October. Further, year-to-date (YTD) (January – November), PPI inflation has averaged 5.5% y/y, higher than the 4.9% y/y recorded over the corresponding period last year.
  • We expect that PPI has peaked in October 2018 at 6.9% y/y and that it should gradually drift lower to 5.1% y/y in December 2019, averaging 5.5% in 2019, which is below the South African Reserve Bank’s upper inflation target band of 3%-6% (see The SA Daily of 12 December). This would be on the back of oil prices retreating to below our and consensus assumptions. The rand should also strengthen to 13.40 against the US dollar by year-end in 2019 (see our report November PPI 6.8% y/y of 13 December, by Thanda Sithole for more detail).  

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