South Africa's producer price index rose by 11.0 percent year-on-year in December from 12.6 percent in November, Statistics South Africa data on Thursday showed. This is the fourth consecutive decrease in the producer price inflation number. The data also showed that annual PPI in 2008 increased to 14.2 percent from a revised 10.9 percent seen in 2007. The PPI dipped -1.1 percent on a monthly basis after November's monthly decrease of -1.3 percent. The PPI was expected to have receded to 11.6 percent year-on-year, a survey by I-Net Bridge found, with forecasts among the 13 leading economists ranging from a low of 11.1 percent year-on-year to 12.6 percent year-on-year. PPI was at 10.3 percent year-on-year a year ago. Economists react to the PPI data:

Doret Els, Efficient: "Well, the figure is in line with what we expected. It shows a slowing down from the 12.6 in November. Producer inflation is definitely slowing. "This figure as well as yesterday's CPI figure provide increasing support for a 100-basis-point interest rate cut in February, although our view is on the conservative side with 50-basis-points."

Colen Garrow, Brait "Well, the inflation figures are all treading in the right direction. They are mending a case for a more aggressive interest rate cut next week, of 100-basis-points as opposed to the 50-basis-points that the market is hoping for."

Jan Mercier, Citi: "It looks encouraging because the figure is below the consensus forecast. On balance, it raises the probability that the MPC could cut aggressively. But I think it will still be a close decision next week and I am still betting on a 50-basis-point cut rather than a 100-basis-point cut."

Kgotso Radira, Investec: "Today's outcome is significantly lower than consensus estimate and bodes well for the interest rate outlook. We expect both CPIX and PPI inflation to continue on their downward trajectory this year. Based on the latest inflation data, it seems targeted inflation could regain target sooner than most expected. The trend in targeted inflation and the rapidly slowing economy supports further interest rate cuts. "We expect another interest rate cut at the February 2009 MPC meeting. We see interest rates being lower by around 300-basis-points by year end."

I-Net Bridge