SA’s producer price inflation ticked higher in January driven by rising food and metal prices, according to data from Stats SA (Stats SA).
The producer price index (PPI) for final manufactured goods rose 1.1% year on year, up from 0.7% in December 2024, while prices increased 0.5% month on month.
January’s result reflects the new PPI basket weightings.
This also marks the second consecutive month of PPI gains after a period of deflation in late 2024, signalling cost pressures may be firming at the producer level.
The food, beverages, and tobacco products category was the largest contributor to the annual increase, rising 4.4% year on year and adding 1.3 percentage points to the overall PPI figure.
“International food prices, a key contributor to local food costs increased by 4.4% month on month (economist agricultural food commodities index) in January, adding upward pressure,” Investec economist Lara Hodes said in a statement.
Within the meat, fish, fruit, vegetables and oils categories there were varied movements: Meat prices fell 3.5% month on month but remained 1.9% higher year on year. Fruit and vegetables jumped 9.4% year on yea showing continued supply constraints. Dairy products rose 3.8% year on year with grain mill products increasing 5.9%.
Hodes noted: “Indeed, Agbiz has stated that higher feed costs could lead to increases, albeit modest, in poultry products and other red meat prices.”
The strongest contributors to the monthly increase in producer prices were furniture and other manufacturing, which rose 1.9%, along with textiles, clothing, and footwear, up 1.7% — each adding 0.1 percentage points to the overall PPI.
Metals, machinery, equipment and computing equipment also saw a 0.9% increase, as did transport equipment, both contributing 0.1 percentage points. Additionally, coke, petroleum, chemical, rubber, and plastic products provided further upward pressure on the index.
Despite these pressures, fuel-related costs continued to provide relief, with coal and petroleum product prices declining 5.8% year on year.
Surge in metals and intermediate goods
The intermediate manufactured goods index, which tracks inputs used in production, saw a sharp rise of 7.3% year on year, up from 5.8% in December. The increase was largely driven by basic and fabricated metals, which surged 8.3% year on year, as well as chemicals and plastics, which saw similar increases.
The mining sector also saw a rebound, with PPI increasing 0.7% year on year following a 1.5% contraction in December. Gold and other metal ores surged 7.9% year on year, contributing 2.2 percentage points to the overall mining PPI, while coal and gas prices saw a strong monthly rebound, rising 4.7% from December.
Electricity costs remain a concern
The electricity and water index climbed 10.0% year on year, though slightly lower than December’s 10.3% increase. Electricity prices surged 10.9% year on year contributing nearly all the increase in the category.
This highlights the ongoing burden of high electricity costs on businesses despite a more stable power supply in recent months.
Agriculture prices rise despite monthly decline
The agriculture, forestry, and fishing PPI increased 7.5% year on year, accelerating from 4.7% in December. However, prices fell 1.1% month on month, primarily due to a 1.3% drop in agricultural prices.
Notably, cereal and other crops prices jumped 38.6% year on year reflecting the impact of dry weather conditions on crop yields. In contrast, live animal prices fell 11.8% year on year, weighing on overall agricultural inflation.
According to Nedbank’s economists, producer inflation is likely to increase gradually this year, driven mainly by the normalisation of the base on food and fuel indices.
“A softer rand, an upturn in global food prices and higher domestic electricity tariffs will drive the moderate upward pressure on food prices. However, the increase will partly be contained by easing operating costs due to a stable power supply and some improvements in logistics,” they said.
Nedbank also said that the return of widespread power cuts, following recent setbacks that destabilised the grid, would put renewed pressure on production costs.
“Food prices will also benefit from higher domestic crops following heavy summer rainfall. On fuel, the upside will be driven mainly by a weaker rand.”
They said that the rand would be likely to remain under pressure against a stronger dollar, “which will benefit from the changes in the US’s economic policies under the Trump administration, volatile global risk sentiment and a prolonged pause in US interest rates”.
They forecast PPI to average about 3.5% in 2025.
Update: February 27 2025
The article has been updated throughout with commentary.
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