Annual producer inflation accelerated to 1.5% in July, largely in line with consensus, marking a notable increase from 0.6% in June.
The month-on-month change in the producer price index (PPI) for final manufactured goods was 0.7%, according to data published by Stats SA on Thursday.
The PPI measures changes in the prices that local producers receive for their goods, making it a key early indicator of inflationary trends in the economy.
Because it captures cost pressures at the factory gate, it often signals future movements in consumer inflation, helping businesses, investors and policymakers anticipate shifts in pricing and interest rates.
The main driver behind the year-on-year uptick in July was a 3.9% increase in prices for food, beverages and tobacco products, which contributed 1.1 percentage points to the annual headline rate. On a monthly basis, petroleum, chemical, rubber and plastic products, paper and printed products recorded a 1.3% and 2.5% increase, respectively.
Among subcategories, the prices of meat and meat products surged 18.2% year on year. Meanwhile, diesel prices rose by 4.5% month on month, while petrol increased 3.0%.
Electricity and water costs also surged, with the index rising 3.8% month on month mainly due to a 10.4% spike in water tariffs and a 3.1% increase in electricity.
In the mining sector, annual inflation accelerated to 7.5%, driven by sharp increases in stone quarrying, clay and diamonds (30.0%) and gold and other metal ores (19.9%).
From an agricultural standpoint, year on year inflation for the sector stood at 6.5%, even though the index declined 1.3% on a monthly basis, largely due to a 1.5% fall in crop prices.
Nedbank economists said they expected producer inflation to increase further.
“Food prices will be the key driver, mainly lifted by a low base. The outbreak of animal diseases remains a notable risk for meat prices. The upside for food prices will be contained by higher field crop production. Global oil prices are likely to stay relatively contained, reflecting subdued demand and excess supply.”
FNB agricultural economist Paul Makube believes downward pressure on food inflation is likely to continue.
“Input cost indicators suggest potential relief, with international crude oil prices below $70/barrel and the rand strengthening to below R18/$,” he said.
“According to the Central Energy Fund’s August 26 update, diesel prices could decline in September by 54c/l (0.05% grade) and 55c/l (0.005% grade). This comes at the right time as farmers begin preparing their fields for the new planting season.”
Nedbank noted oil prices remained vulnerable to the ongoing geopolitical conflicts in the Middle East.
“Persistent structural constraints and other operational costs will also exert upward pressure on prices. Despite the expected moderate increase, PPI will remain relatively subdued, averaging below 3% in 2025 before gaining momentum in 2026,” Nedbank
said.
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