Consumers could continue paying higher prices for food, beverages and tobacco products well into the festive season as the cost of manufacturing goods remains elevated, in spite of moderating producer inflation.
Data from Statistics South Africa (Stats SA) yesterday showed that the annual headline producer price inflation eased less than expected as it edged lower in September.
Stats SA said the producer price inflation (PPI) moderated to 16.3% in September year-on-year from 16.6% in August, falling for the second month in a row though the print was above market estimates of 15.7%.
Prices slowed down for coke, petroleum, chemical, rubber and plastic products but remained elevated at 34.2% compared to the same month a year ago.
The rate of increase in this category has slowed down, helped by the reduction in petrol and diesel prices due to slowing global demand, easing supply constraints, falling shipping costs, and the release of strategic stocks by the US.
The price of Brent crude oil has been volatile but still down from its peaks, currently trading around $95 per barrel which could help to reduce local fuel prices further.
The moderation in global food prices indicates that food inflation is probably nearing its peak and is expected to start easing in the coming months.
Stats SA chief director for price statistics Patrick Kelly, however, said though the PPI had declined from the steep 18% recorded in July, it was still too early to say whether producer prices had peaked.
“What makes it difficult to make a call like that is the high level of uncertainty generally in the environment, particularly with international conflicts,” Kelly said.
“We know that inflation has been driven largely by international factors, both food prices, particularly grain and fuel are large drivers of inflation, and it is still the case with this month’s PPI.”
Prices of food products, beverages and tobacco products remained elevated at 12.1% in September, accelerating for the 11th consecutive month from 5.4% recorded in November 2021.
PPI for intermediate manufactured goods rose to 13.7% from 13.4%, mainly due to higher prices of basic and fabricated metals, as well as chemicals, rubber and plastic products.
Annual PPI for mining accelerated to 30.1% from 17.3%, lifted by a jump in coal and gas prices, and a sharp increase in non-ferrous metal ores.
PPI for agriculture, forestry and fishing also rose to 16% from 15.1%, mainly reflecting higher fresh produce prices.
PPI for electricity and water surprised to the downside, falling by 1% year-on-year after increasing by 8.6% in August due to a significant decline in electricity prices.
Nedbank economist Johannes Khosa said the downward trend on PPI was expected to continue in the coming months, in line with the recent easing in global commodity prices.
Khosa said they forecast PPI to end the year in the low double digits at around 14%, but this projection has upside risks attached to it, emanating from both global and domestic factors.
“On the global front, the main concerns are geopolitical shocks and unfavourable weather patterns,” Khosa said.
“Locally, the main uncertainty is the vulnerable rand and higher manufacturing cost associated with persistent power shortages, which is forcing power-intensive industries such as mining and manufacturing to rely on diesel generators for power.
“This will partly offset the benefit of subsiding fuel prices and keep PPI at elevated levels.”
On a monthly basis, producer prices were up by 0.7%, pushed higher by an increase in metals, machinery, equipment and computing equipment.
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