Annual producer inflation slowed sharply in March, with the headline producer price index (PPI) for final manufactured goods rising 0.5% year on year, down from 1.0% in February, Stats SA reported on Thursday.
Monthly price pressures remained firm though; producer prices increased 0.6% month on month, driven largely by higher costs of food, beverages and tobacco.
At 0.5%, annual PPI is the lowest positive rate recorded in nearly five years and well below Nedbank economists’ forecast, which expected PPI to ease to 0.9%.
Petroleum-related products, which account for just over 12% of the final manufactured goods index, were one of the biggest reasons for the benign reading, with diesel and petrol prices falling by 10.8% and 10.6% year on year, respectively.
Food, beverages and tobacco were once again the biggest contributors to the overall increase, rising 4.1% year on year and 1.1% month on month and contributing 1.2 percentage points to the annual PPI and 0.3 percentage points to the monthly rate.
The steepest monthly increases were reported for tobacco (6.2%), beverages (1.8%), meat and meat products (2.4%), and household appliances and office machinery (2.9%).
Still, there were monthly declines in dairy and grain mill products, and fruit and vegetables, suggesting some volatility in food input costs.
The PPI for intermediate manufactured goods — which reflects the cost of goods used in production — slowed to 7.4% year on year from 8.5% in February, but was little changed on a monthly basis (+0.1%).
Prices in this category were buoyed by basic and fabricated metals, which rose 10.2% year on year, and chemical, rubber and plastic products (6.9%).
Mining PPI accelerated to 5.9% year on year, up from 2.5%, and by 1.4% in the month. The surge was underpinned by sharp increases in gold and metal ores (16.6% year on year), non-ferrous metal ores (3.8%) and stone quarrying, clay and diamonds (38% year on year).
After months of steady increases, the cost of electricity and water eased 2.3% month on month, helping to temper the overall rise in input costs. But power costs were 10.8% higher year on year, suggesting ongoing strain on producers reliant on energy-intensive processes.
Annual inflation in the agriculture, forestry and fishing sector slowed sharply to 2.4%, down from 7.6% in February. On a monthly basis these prices were down 2.5%.
The reversal was mainly due to a 6.8% decline in crop and horticulture prices — particularly fruit and vegetables, which dropped 10.3% from February.
Agbiz chief economist Wandile Sihlobo said the decline in agricultural PPI mirrors the price trend they have observed of various commodities at farm level, in particular grains and oilseeds.
“SA expects a decent harvest of summer grains and oilseeds this year,” he said. “The 2024-25 summer grain and oilseeds production — comprising maize, sunflower seed, soybeans, groundnuts, sorghum and dry beans — is forecast at 18.0-million tonnes, up 16% on the prior season’s crop.
“The recovery is on the back of favourable rainfall, though the excessive rains in April are starting to concern us at this late stage of the season where crops are maturing.”
Economists at Nedbank forecast a moderate increase in overall PPI for 2025.
“The low base established in the second half of last year will amplify the upward trend, particularly for agricultural products,” the said in a note.
“Local food prices will also be affected by higher global food prices, a weaker rand and potential disruptions to global supply chains due to the unfolding trade war.
“Global oil prices are expected to remain relatively stable in 2025, owing to balanced supply and demand dynamics.”
Upward pressure was also likely from the 12.74% hike in electricity tariffs, they added.
“Renewed and sustained rand weakness poses the most significant upside risks to the outlook ... Altogether, we expect PPI to average around 3.1% in 2025, up only slightly from 3% in 2024.”
Update: April 24 2025
This story contains comment from Nedbank economists
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