Annual producer inflation accelerates to 2.3% in March

Annual producer inflation accelerated to 2.3% in March from 1.8% the previous month, driven mainly by food products, beverages and tobacco products as well as the furniture sector.

The producer price index (PPI) increased by 1.1% month-on-month in March, Stats SA said in its latest report. The main contributors to the monthly inflation rate were coke, petroleum, chemical, rubber and plastic products, as well as food, beverages and tobacco products.

Economists had forecast the year-on-year number to range between 1.7% and 2% for March.

Production costs are set to rise in the coming months as a consequence of the Middle East conflict, which has driven the price of fuel significantly higher.

According to agricultural groups AgriSA and Agbiz, in most farming systems, fuel accounts for between 12% and 18% of production costs, making it a critical cost driver in periods of volatility.

In addition to fuel, other major inputs such as fertiliser, often accounting for up to 35% to 50% of production costs, have also spiked due to global supply disruptions and geopolitical risks.

A disaggregation of the food basket in the March production inflation data shows that meat and meat products’ inflation eased from 11.2% year-on-year to 8.3%. According to Agbiz, base effects on meat, along with cattle slaughtering, will continue to help ease inflation in the segment.

The producer price index measures changes in the prices of locally produced commodities. Stats SA surveys a sample of producers each month to compile the indices for final manufactured goods, intermediate manufactured goods, electricity and water, mining, and agriculture, forestry and fishing.

The annual producer inflation for intermediate manufactured goods rose to 9.1% in March from 7.8%, largely due to basic and fabricated metals as well as sawmilling and wood.

The PPI for electricity and water was up 17.9% year-on-year in March vs 15.4% in February, while that for mining surged 33% compared with 30.3%.