Producer price inflation -- or factory gate prices -- grew by 6.8 percent year-on-year in September down from 7.8 percent year-on-year in August, Statistics SA said on Thursday.
This was well below market expectations.

On a monthly basis the producer price index decreased by 4.1 percent.
“Lower agricultural and industrial commodity prices as well as the seasonal decline in electricity costs were the main factors behind the monthly decline,”  Nedbank Group’s economic unit said.

Further gains in industrial commodity prices were likely to be limited in the short term, due to the slowdown in global growth and ample stockpiles.

“However, with the increased likelihood of another round of quantitative easing in the US and continued growth in key commodity-consuming countries like  China, there is a risk of price increases in the new year,” Nedbank said.

Weak demand, both locally and globally, low input costs as well as the strong rand would help to contain price increases of manufactured goods.

“We expect the Reserve Bank’s Monetary Policy Committee to pause over the next two meetings, with a possible 50 basis point cut in March next year.”

However, the continued improvement in the inflation outlook as well as the strength of the rand might prompt the bank to act sooner, Nedbank said.