SA producer inflation races higher for the second month


Photo by Reuters

26th October 2023

By: News24Wire


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September’s annual producer price index accelerated for a second consecutive month to 5.1% from 4.3% in August. This was hotter than economists expected. 

The main contributor was food products, beverages and tobacco products, which increased by 4.4% year-on-year and contributed 1.1 percentage points, according to Stats SA. That was followed by metals, machinery, equipment and computing equipment, then paper and printed products and finally transport equipment.

SA Reserve Bank Governor, Lesetja Kganyago, warned at the Monetary Policy Committee meeting last month that food prices may increase further and put pressure on inflation. The reasons behind climbing food costs include volatile oil prices, a depreciating rand and weather events that have damaged crops.

The gauge rose 1.5% month-on-month.

With PPI showing that domestic producers are receiving higher prices for their goods, a knock-on effect typically follows for consumer prices. Earlier this month data from Stats SA showed annual consumer price inflation accelerate to 5.4% in September from 4.8% in August – this was also the second consecutive increase. It was in line with economists' expectations.

Neither measure bodes well for the interest rate decision at the end of November. In sub-Saharan countries with still rising inflation, "further monetary tightening may be required until there are clear signs that inflation is cooling", the International Monetary Fund said in a recent report.

The country’s benchmark rate, at 8.25%, is already at a 14-year high, but so far data is signalling that the MPC may have to hike it further in order to try quell inflation, which eats away at the value of the rand.


Edited by News24Wire



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