Producer inflation cools to 7.5% in June

Producer inflation eased to 7.5% in June after spiking to 7.8% in May, with coke, petroleum, chemical, rubber and plastic products still accounting for most of the year-on-year price increases at the factory gate.

Annual inflation for the sector remained elevated at 22%, contributing 4.7 percentage points to the overall annual number, Stats SA reported on Thursday.

Inflation for paper and printed products was 8.5%, accounting for 0.7 percentage points, while that for metals, machinery, equipment & computing equipment came in at 3.2%, adding 0.5 percentage points.

On a monthly basis prices for coke, petroleum, chemical, rubber and plastic products contracted 0.3%, contributing to a 0.1% decrease in the producer price index (PPI) in May and June.

The PPI measures changes in the prices of locally produced commodities. Stats SA surveys a sample of producers monthly to compile the indices for final manufactured goods — the headline number — as well as intermediate manufactured goods; electricity and water; mining; and agriculture, forestry and fishing.

The annual change in the PPI for intermediate manufactured goods eased to 12.4% in June from 13.7% in May, while that for electricity and water slowed sharply to 5.5% from 12.3% and mining inflation pulled back to 18.4% from 28.1%.

The index for agriculture, forestry and fishing fell 7.9% in June compared with the same month last year, after declining 5.4% year on year in May.

The 7.8% May spike in producer inflation, followed by data showing consumer inflation accelerated to 5% in June — driven mainly by higher transport costs linked to the US-Iran war — had led to expectations that the Reserve Bank would hike its benchmark policy rate 25 basis points on July 23.

But, surprisingly, the Bank kept the rate at 7%, saying the policy stance was appropriate for now after an increase in May, though it warned that upside risks to the inflation outlook remained.

Business Day