South African Producer-Price Inflation Accelerates to 18.9%

By Mike Cohen

Aug. 28 (Bloomberg) -- The cost of goods leaving South African factories and mines rose at the fastest pace in 22 years last month, buoyed by surging fuel and electricity prices.

Producer-price inflation accelerated to 18.9 percent from 16.8 percent in June, Pretoria-based Statistics South Africa said today. Prices were expected to rise 17.5 percent, according to the median estimate of 16 economists surveyed by Bloomberg. In the month, prices rose 2.7 percent.

Factory-gate inflation has exceeded 10 percent for seven months, adding to pressure on consumer prices as retailers pass on higher costs. Consumer inflation accelerated to 13 percent in July, the fastest pace since the government began compiling the data in 1998, the statistics agency said yesterday.

``South Africa is clearly not out of the woods yet,'' Razia Khan, an economist at Standard Chartered Plc in London, said in a note to clients. ``Inflation expectations do need to be watched, and they will continue to pose an upside risk to inflation in the months ahead.''

The central bank raised its benchmark interest rate by half a percentage point to 12 percent on June 12, the sixth increase in less than a year. The bank's monetary policy committee kept rates on hold at the conclusion of its last meeting on Aug. 14 after the oil price declined and economic growth slowed.

Prices of imported goods used in manufacturing rose an annual 22.8 percent in June, down from 24.6 percent in the previous month, the statistics office said.

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