Consumers face higher prices as PPI soars to five-year high
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SOUTH African consumers will have to bear the brunt of higher prices for goods for a little longer as producer prices rose near a five-year high last month.
Data from Statistics South Africa (StatsSA) yesterday showed that annual headline producer price inflation (PPI) jumped by 7.4 percent from a year earlier in May.
This May producer inflation print followed a 6.7 percent rise in April and was slightly above market expectations of a 7.3 percent surge.
StatsSA said this was the highest producer inflation rate since July 2016 when the rate was also 7.4 percent.
The PPI was driven, as the prices of coke, petroleum, chemical, rubber and plastic products rose by 17.1 percent.
Food, beverages and tobacco increased by 6.2 percent year-on-year and metals, machinery, equipment and computing equipment rose by 6.8 percent during the same period.
Producer prices have risen sharply over the past five months, while consumer prices have also picked up, albeit at a much slower pace.
However, economists expect producer prices to be relatively contained until demand is lifted from its depths once the first-round base effects have been completely eradicated.
Nedbank senior economist Nicky Weimar said inflation peaked last month and it was expected to return to trend in the months ahead.
“However, upside risks have increased. These include higher global commodity prices and local electricity tariffs,” Weimar said.
“Still, the pass-through to consumer prices is likely to be limited, contained by subdued demand conditions.”
On a monthly basis, producer prices went up 0.4 percent in May, following a 0.7 percent increase in the prior month, and were slightly above market estimates of a 0.3 percent rise.
The PPI for mining surged by a massive 21.7 percent in May from 10.8 percent in April.