Johannesburg - Producer price inflation - a key indicator of consumer inflation - rose to 6.8 percent in June due to higher fuel and food costs.
The economic measure rose from 6.5 percent, Statistics SA said on Thursday. It added, on a month-on-month basis, prices at the factory gate were up 0.6 percent, after declining 0.3 percent the previous month.
Investec’s chief economist, Annabel Bishop, said in a note that the consensus had been for producer price inflation to come in at 6.7 percent.
Bishop explains the increase was affected by June’s diesel price rising by 76c/litre. “In July a 42c/litre hike occurred, but in August around a 70c/litre cut is currently likely, mainly on lower dollar oil prices, which will have some dampening effect on price pressures in that month. Seasonally cost pressures persist from electricity production.”
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Investec adds coal and petroleum product prices rose 4.5 percent month-on-month, with the oil price averaging $43.3 a barrel in April, then rising to $47 in May and $49.80 in June.
Bishop also notes food product price inflation rose to 11.2 percent year-on-year, pushed by grain on the back of the worst drought in recorded history.
It notes SA will be a net importer of grain and oilseeds in the 2016/17 season.
Bishop adds the improvement in the exchange rate “will counter-balance some of the price pressures if the domestic currency maintains its new levels, or strengthens further”.
IOL