Producer inflation accelerated to a record high in June, and may be close to the peak in the current cycle due to the moderation in international oil prices as well as soft commodity markets.
“We are very close to the peak in the high inflation cycle. Obviously it will take a while before we start to see the moderation in prices feed through to data,” Stanlib economist Kevin Lings said on Thursday.
SA’s producer price index (PPI), which measures changes in the prices of goods bought and sold by manufacturers, rose 16.2% in June year on year, beating market forecast, Stats SA said in a statement. The Bloomberg median estimate was for a rise of 15.6%.
The PPI data indicates rising input costs for factories, which they then may pass on to retailers and consumers so setting future trends in inflation, which the Reserve Bank considers when deciding on interest rates.
Earlier in July, the Bank hiked rates by 75 basis points to 5.5%, the biggest rise in two decades, in its attempt to reduce price pressures.
“Although [this was] a shocking number and higher than expected, I do believe that we might be close to an upper turning point in both the consumer price inflation and PPI cycles in SA,” said independent analyst Elize Kruger.
“Fuel prices have been a major driver of the PPI, contributing about two-thirds of the monthly increase. We are about to see the first meaningful reductions in fuel prices since January 2022.”
Main contributors to the headline annual producer inflation rate were coke, petroleum, chemical, rubber and plastic products. The product categories incorporate petrol and diesel prices, which are at record highs.
Other contributors were food products, beverages and tobacco products; and metals, machinery, equipment and computing equipment. Month on month, PPI rose by 2.1%, the agency said.
Nedbank analysts said in a note that producers were still feeling the effects of elevated global commodity prices, driven initially by a surge in consumer demand post-lockdowns and then worsened by supply-side constraints with the Ukraine war and renewed lockdown restrictions in China.
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