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Dec PPI Adds to Evidence of Slowing Inflation

MNI (London)

SOUTH AFRICA DEC PPI 0.0% M/M (FCST +0.3%); NOV +0.5% M/M

SOUTH AFRICA DEC PPI +13.5% Y/Y (FCST +13.9%); NOV +15.0% Y/Y

  • Today's December data saw a downside surprise to PPI, as prices stalled on the month and dampened by 1.5pp to +13.5% y/y. This is the lowest PPI rate since April and 4.5 points below the July peak of +18.0% y/y. Energy continues to account for around half of headline inflationary pressures, food to a lesser extent.
  • Downwards pressure came from lower energy costs, yet prices slowed in a largely broad-based manner whilst falling on the month in agricultural prices.
  • This will be further positive news for South African inflation, after headline CPI slowed slightly more than forecast to +7.2% y/y in December. Core inflation unexpectedly eased, raising hopes that the worst might be over, yet inflation expectations remain elevated
  • The SARB is expected to reduce the pace of monetary tightening at today's meeting from November's 75bp. The decision is due shortly after 1300 GMT. Consensus is split between 25bp and 50bp rate hike. See MNI's full preview here.

Source: Statistics South Africa

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