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PPI in April above market expectations

Producer Price Index (PPI) measures the costs of producing consumer goods, commodity and food prices, thus directly affecting retail pricing, photo by Simphiwe Mbokazi.

Producer Price Index (PPI) measures the costs of producing consumer goods, commodity and food prices, thus directly affecting retail pricing, photo by Simphiwe Mbokazi.

Published May 26, 2022

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SOUTH African consumers will have to bear the brunt of higher prices for the foreseeable future as the prices of producing goods rose to a record nine-year high in April on rising fuel and food prices.

Data from Statistics South Africa (Stats SA) yesterday showed that the producer price inflation (PPI) rose by 13.1 percent in April compared to the same month a year ago.

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The PPI accelerated from an 11.9 percent increase in March, and was above market expectations of 12.3 percent.

This PPI print marks the fifth straight month of double-digit producer inflation and the highest reading since records began in 2013.

Stats SA said producer prices increased mainly due to the soaring prices of fuels, food and metals, machinery and equipment.

Coke, petroleum, chemical, rubber and plastic products rose by 28.4 percent year-on-year, while food products, beverages and tobacco products increased by 8.3 percent.

On a monthly basis, Stats SA said producer prices advanced 1.8 percent, slowing from a 2.5 percent advance in March but above market forecasts for a 1.1 percent rise.

The Don Consultancy Group (DCG) chief economist, Chifi Mhango, said the rising trend in PPI reinforced the latest decision to hike interest rates by 50 basis points, considering its overall impact on consumer price inflation.

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“Producer Price Index (PPI) measures the costs of producing consumer goods, commodity and food prices, thus directly affecting retail pricing, hence seen as a good pre-indicator of inflationary pressures in an economy,” Mhango said.

He continued to express concern about the impact of rising producer prices on overall consumer inflation outlook, which points to more living costs pressures.

The other BRICS countries were also not spared. Mhango said the latest year-on-year PPI data from respective national statistics offices showed elevated producer price inflation rates of 15.08 percent, 18.3 percent, 31.5 percent, for India, Brazil and Russia, respectively.

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“India’s producer price inflation was the highest since December 1998, while Russian producer price has been impacted more by sanctions from the West due to Moscow’s invasion of Ukraine, while in Brazil rising prices of intermediate goods have exerted pressure on final producer prices,” Mhango said.

“In a nutshell, global and domestic producer prices continue to accelerate amid broadening inflationary pressures, underscoring the tough battle by central banks to contain the inflation rate within target ranges.”

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