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PPI shock drop

By Staff Writer

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PPI shock drop 

The Producer Price Index (PPI) was released by Statistics SA yesterday.

The PPI is basically a measure of inflation for making stuff.

The cost to produce goods is affected by inflation like everything else. The PPI has slowed to 12.6% in November 2008 as an annual percentage change, from 14.5% in October 2008.

This is an unexpectedly large slide, and is positive news. As stuff gets cheaper to make, in theory, these cuts should be passed onto the consumer and stuff should get cheaper to buy. This is not guaranteed and hard hit retailers may not pass their savings from the factory gate onto your plate just yet.

Instead they may take a bit of profit or shore-up their cash reserves to protect against uncertainty.

The financial newswires covered this story from various perspectives.

Business Day reported that the market had predicted PPI to be at 13.7% for November. The article also mentioned that economists don't consider the PPI as an accurate indication of CPI or consumer inflation due to it not measuring services, only goods.

There is also the issue of savings not being passed onto the consumer.

The Times looked at this story and got its teeth into the meat of it.

They picked out the various factors that have influenced the PPI and worked out for us what its main drivers were.

There were sharp increases in eggs, vegetables and fruit and nuts. This was mitigated by falls in 'other agricultural products'. The 'overall agricultural inflation was 0.5 percent from October to November, taking the year's deflation to 1.5 percent'.

In the manufacturing sector 'Car parts and accessories got 18.8 percent more expensive year-on-year'. The article noted that the now steady downward trend in both consumer and manufacturing inflation was an indication that we can expect rate cuts next year.

BUA News said that the lower PPI can be attributed to 'decreases in the annual rates of change for basic metals, products of petroleum and coal, mining and quarrying'. These decreased were also offset slightly by increases in inflation for electricity and agricultural products.

The Dispatch carried a series of statistics looking at PPI, imports, exports and the make up of the PPI.

It looks like things are getting better, but it could be worse, much worse.

The Times carried a story that inflation in Zimbabwe has hit:

41 900 000 000 000 000 000%!

Justmoney does not even know how to pronounce a number that big, and our spell checker does not recognise it either, but our inflation rates, while high, pale in comparison to that.

The turn around appears to be coming, but don't go crazy just yet, rather get a savings account and budget frequently, so that when the good times really do come back you have got money to spend.

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