South African Price-Producer Inflation Accelerates to 6.9%

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South African Price-Producer Inflation Accelerates to 6.9%
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June 30 (Bloomberg) -- The cost of goods leaving South African factories and mines rose at a faster pace in May than the previous month, reflecting a surge in the price of oil and other commodities.

Producer prices increased an annual 6.9 percent after gaining 6.6 percent in April, Pretoria-based Statistics South Africa said on its website today. The median estimate of 14 economists surveyed by Bloomberg was 7.1 percent. Prices rose 0.4 percent in the month.

The acceleration in producer inflation reflects "higher commodity prices overall," Peter Attard Montalto, an economist at Nomura Plc in London, said in an interview ahead of the release of today's data. "Even though they have come off in recent months, we won't feel the effects of that in the headline numbers in PPI for another few months."

The price of crude fell 9.9 percent in May on the New York Mercantile Exchange, trimming its 12-month gain to 39 percent. Higher factory-gate prices may feed through to consumer inflation, placing pressure on the central bank to raise interest rates from a 30-year low.

Consumer inflation accelerated to 4.6 percent in April from 4.2 percent the month before. The central bank's inflation target range is between 3 percent and 6 percent.

Reserve Bank Governor Gill Marcus left the benchmark interest rate unchanged at 5.5 percent on May 12, while warning that the outlook for inflation had deteriorated. The bank expects inflation to average 5.1 percent this year and 6 percent in 2012, with a temporary breach of its target in the first quarter of next year.

"We haven't see the second-round effects" of higher fuel prices translating into more generalized inflation yet, Monde Mnyande, the bank's chief economist, said in a June 23 speech in Cape Town. "We are monitoring those very closely and we will definitely act as soon as we start to see them."