South Africa's producer price index registered deflation of -3.8 percent year-on-year in July from –4.1 percent y/y in June, Statistics South Africa (Stats SA) data on Thursday showed. This is the eleventh consecutive decrease in the producer price inflation headline number.

The PPI increased 2.9 percent on a monthly basis after June's monthly increase of 1.5 percent.

The PPI was expected to have decreased at 4.5 percent y/y according to a survey of 12 leading economists by I-Net Bridge, with forecasts ranging from –3.4 percent to –5.5 percent y/y.

Economists react to the PPI data:

Kgotso Radira, Investec Group Economics:

"The less-than-expected fall in PPI was due to the 31.3 percent electricity price increase.

"Another interest rate cut is becoming increasingly unlikely following the cumulative 500bp interest rate cuts since December 2008. Any interest rate cut this year will depend on the speed with which CPI inflation moderates and the growth prognosis.

George Glynos, ETM:

"It's a bit disappointing. We were expecting a bit more negative number than that. Again, I would argue for leaving rates on hold for now."

Mike Schussler, economists.co.za:

"The figure is a little less than expected. It shows the stickiness of prices is still a concern. We are starting to see an upward trend in commodity prices, but we still have another two to three months before we will see these filter through to the PPI figures.

"Yes, we are going through a recovery in commodities but some of that recovery is inflationary to South Africa."

Freddie Mitchell, Efficient Group:

"We had expected -4.0 percent, so we are not too far away, but as a whole, the market was slightly out. The PPI figure shows that that the trend and pace we saw in producer price decline was slowing down."

Elize Kruger, KADD Capital:

"Although the PPI moderated less than what the market anticipated, PPI remains firmly in deflationary territory, indicating that there could still be deflationary forces in the pipeline that might result in a further moderation in consumer prices, as was evident in the latest CPI release relating to food prices.

"Given that PPI is still in line with general expectations, today's release would not have a specific bearing on the monetary policy debate, other than to remain a positive factor.

"At KADD Capital, we believe that interest rates might have reached a bottom at current levels, but could remain at these low levels for a prolonged period."

I-Net Bridge

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