The PPI decreased 1.1% on a monthly basis after April's monthly decrease of 0.2%.
The PPI was expected to have decreased at 2.0% y/y according to a survey of leading economists by I-Net Bridge, with forecasts ranging from -1.2% to -3.7% y/y. PPI was at an elevated 16.4% a year ago.
Fanie Joubert, economist at Efficient Group says: "It's more than the market consensus. This confirms that on the producer side, prices are in a deflationary environment for the first time since 2003.
"It's a positive development, but we must remember that it's coming from a very high base created in the first of 2008."
Carmen Altenkirch, economist at Nedbank says: "Today's producer inflation data is extremely encouraging. The high base established in 2008 combined with falling domestic and international demand should keep producer price inflation in negative territory for much of the remainder of this year. Lower input prices as well as contracting domestic demand should continue to put downward pressure on consumer inflation.
"This is good news for the medium-term inflation outlook, which the Reserve Bank will be focusing on at today's meeting. So, we're expecting 50 basis points".
Annabel Bishop, economist at Investec says: "PPI inflation came out much lower than expected, recording the first month of deflation since December 2003. We continue to believe the SARB will cut interest rates by 50 basis points today and 50 basis points in August. The release of the second quarter of 2009 GDP figures are likely to show the economy contracted by more than the authorities expect, we forecast a second quarter of 2009 figure of -4.2% qqsaa, if not closer to -5.0% qqsaa.
"The larger-than-expected fall in the PPI on the year was due to a sharp drop in the rand oil price and, to a lesser extent basic metals."
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