Consumers will be digging a bit deeper for goods as producer inflation accelerated to an all-time record high in May, pushed higher by elevated global supply chain pressures and reflecting concerns over raw material shortages.
Data from Statistics South Africa (Stats SA) yesterday showed that producer prices in South Africa surged by 14.7 percent year-on-year in May, rising from 13.9 percent in April.
This marked the sixth consecutive month of double-digit inflation for final manufactured goods after starting the year at 10.1 percent, and the highest reading since records began in 2013, also topping market estimates of 14.1 percent.
Stats SA said the main contributors to the headline PPI annual inflation rate were coke, petroleum, chemical, rubber and plastic products which rose by 31.7 percent from a year ago, largely due to the rising demand for fuels.
A modest 12 cents decline in the petrol price in May offered a slight reprieve, but June’s hefty increase, with another sizeable hike building for July is expected to weigh heavily on already stretched producers.
Additional upwards pressure also came from costs of food products, beverages and tobacco products rising by 9.7 percent, and metals, machinery, equipment and computing equipment which went up 15.9 percent.
Investec economist Lara Hodes said producer prices were set to continue rising in the months ahead, pushed higher by rising fuel prices.
An increase in prices within the metals, machinery, equipment and computing equipment category also added to the higher annual headline reading.
“A modest 12 cents decline in the petrol price in May offered a slight reprieve, however June’s hefty increase, with another sizeable hike building for July will weigh heavily on already stretched producers,” Hodes said.
“Meat and meat products’ inflation, which is one of the largest categories in the food basket rose to 12.1 percent from a prior 11.3 percent, while the grain mill products, starches and starch products and animal feeds group increased further to 13.7 percent from 10.6 percent in April.
“This is in line with the Food and Agricultural Organization of the United Nations (FAO) Cereal Price Index which has recorded notable year-on-year increases, and was up a further 29.7 percent in May.”
Stats SA recently noted that prices for food and non-alcoholic beverages jumped by 2.1 percent between April and May, representing the largest monthly increase since February, 2016 when the country was experiencing a severe drought.
The oils and fats sub-category, another commodity group heavily impacted by the war in Eastern Europe, climbed to 61.3 percent year-on-year from 47.7 percent in April.
According to Agbiz, while recent projections by the Crop Estimates Committee point to “mainly optimistic production data” for South Africa, these will have only a “minimal impact on prices” specifically, as the domestic grains and oilseeds prices primarily follow the global markets.
On a monthly basis, Stats SA said producer prices advanced 1.8 percent, the same pace as in April but above market forecasts of a 1.3 percent increase.