PPI shoots up as supply constraints weigh

Producer price inflation has climbed to 11.9% in March, the highest it’s been since 2013

May 01, 2022 at 7:17 am

The rise in producer price inflation to the highest level since 2013 has come as little surprise given escalating costs amid constraints in supply chains caused by the war in Ukraine, say experts.

Stats SA said this week that PPI had climbed to 11.9% in March, up from 10.5% a month earlier and higher than the market consensus. It touched 2.5% month-on-month in March.

The higher PPI reflected higher inflation for coke, petroleum, chemical, rubber and plastic products, which increased 26.8% year on year, while metals, machinery, equipment and computing equipment increased 13% year on year.

Prices of food products, beverages and tobacco products rose 7.6% year on year. Meat and meat products inflation, which is one of the largest categories in the food basket, rose slightly to 9.9% from the previous 9.7% year on year. The oils and fats subcategory rose the most at 47.7% year on year.

According to agriculture business chamber Agbiz, the Russian invasion has devastated Ukraine’s exports and agricultural activity, thus limiting sunflower oil exports. “Moreover, Indonesia’s decision to ban palm oil exports also introduced uncertainties about the global vegetable oil supplies,” it said.

The Don Consultancy Group chief economist Chifi Mhango said the annual PPI rate is not only high in SA but also in the US and China. March PPI rose to 11.2% and 8.3% year on year in the US and China respectively.

He said the latest data from the euro area indicated a record-breaking increase to 31.4% year on year, “thus indicating the cost pressure caused by Russia’s invasion of Ukraine and persistent supply chain disruptions globally”.

In terms of Brics countries, the latest year-on-year PPI data showed increases of 14.55%, 20.05% and 26.7%, for India, Brazil and Russia respectively.

“Global inflationary pressures within the industrial production landscape remain elevated and producers will continue to pass the costs to consumers, thus exerting further pressure on consumer price inflation as it is emerging across various countries, with SA not being spared.”