PPI inflation lower than expected
Producer Price Index (PPI) inflation for November came in lower than expected on Thursday and at least one senior economist warned that one of the driving factors was lower meat prices as farmers culled herds amid a worsening drought.
Statistics South Africa said PPI for final manufactured goods edged up to 4,3 percent in November, an increase of just 0,1 percent on the figure for October, and lower than consensus forecasts of 4.5 percent.
Investec chief economist Annabel Bishop noted that meat price inflation had fallen sharply as farmers sold stock ahead of worsening drought conditions. She said food product price inflation had slipped to 5.9 percent year-on-year as meat price inflation “collapsed” to 1.3 percent, as farmers sold livestock, typically for slaughter.
“It is a temporary effect and meat price inflation will likely lift dramatically next year, unless the drought is convincingly broken,” she said.
Bishop added: “It is not a good outcome that farmers have to cull herds in the absence of sufficient government financial support … which occurred historically through the contingency reserve fund.”
Government had used the contingency reserve fund this year to cover a larger-than-expected increase in civil servant remuneration. - ANA
(File photo: Gallo Images)