S.Africa's PPI falls again as price pressure ease

JOHANNESBURG (Reuters) - South Africa's factory gate inflation fell by a more-than-expected 3.3 percent year-on-year in October, data showed on Thursday, pointing to continuing easing in price pressures, although the rate of decline slowed.

Statistics South Africa said producer inflation, representing domestic output, fell for the sixth consecutive month, following on a 3.7 percent decline in September, and dipped 0.1 percent month-on-month.

Economists polled by Reuters last week forecast that annual PPI had fallen by 3.1 percent and increased 0.1 percent on a monthly basis.

The figures show price pressures have cooled in Africa's biggest economy, and with consumer inflation back in the central bank's 3 to 6 percent band, at 5.9 percent, the data may keep faint hopes alive of another interest rate cut.

However, the Reserve Bank and economists warn risks loom, particularly from possible big power price increases, while base effects could push inflation up into the new year.

The central bank's policy committee does not meet again until late January and will have more inflation data to study before making its next decision on interest rates.

"Essentially it was largely in line with what we were expecting, so a slowing in the pace of deflation and producer prices," said Jeffrey Schultz, macro strategist at Absa Capital.

"Essentially we continue to see a slowing in the pace of deflation in PPI over next few months, and we are probably likely to see producer prices jump back into inflationary territory early next year. Purely on the base effect story."

Stats S.A. said imported commodities inflation declined 10.2 percent year-on-year in October compared with -16.2 percent the month before, with a relatively strong rand continuing to help depress prices.