South African Producer-Price Inflation Unchanged at 5.2%

South African producer-price inflation was unchanged at 5.2 percent in December, giving the central bank room to keep interest rates at their lowest level in more than 30 years to stimulate growth.

The cost of goods leaving factories and mines fell 0.1 percent from the previous month, Pretoria-based Statistics South Africa said on its website today. The median estimate of 12 economists surveyed by Bloomberg was for an annual gain of 5.5 percent.

Economists predicted producer-price inflation will accelerate as fuel and food prices rose and the rand weakened. The currency dropped 5.6 percent against the dollar since the start of this year, the world’s worst performing currency after Malawi’s kwacha, boosting import costs.

“Producer inflation is expected to drift marginally higher in the coming months,” Nedbank Group Ltd. (NED), South Africa’s fourth-largest bank, said in an e-mailed note to clients. “The weaker rand as well as higher food and oil prices pose the biggest upside risks to the inflation numbers.”

The Reserve Bank, which targets consumer inflation of between 3 percent and 6 percent, has held the benchmark repurchase rate at 5 percent since July to bolster growth in Africa’s largest economy.

“We believe that rates will remain at current levels for most of 2013 with some reversal in policy easing either later this year or early in 2014,” Nedbank said.

Every 1 percent decline in the rand adds as much as 0.2 percentage points to inflation, according to Johannesburg-based Standard Bank Group Ltd. Consumer-price inflation accelerated to a seven-month high of 5.7 percent in December.

The rand traded at 8.9832 per dollar at 1:15 p.m. in Johannesburg, up from 9.001 before the release of the inflation data and 9.0359 late yesterday.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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