Prices for final manufactured goods are expected to remain elevated in the next coming months as a result of impending fuel price hikes before moderating as the volume of products increases in various fresh produce markets.
Statistics South Africa (Stats SA) said yesterday that the annual producer price inflation (PPI) quickened to 4.7% in January, up from 4.0% in December, following a two-month downswing.
Stats SA said the main contributors to the headline PPI annual inflation rate were food products, beverages and tobacco products; metals, machinery, equipment and computing equipment; coke, petroleum, chemical, rubber and plastic products; and transport equipment.
Inflation for food, beverages and tobacco products continued to ease off a high base, moderating to 4%, its lowest level since August 2020 from 4.6% in December.
Prices of transport equipment rose to 7.3% from 6.8%, lifted by an acceleration in motor vehicles and parts prices.
Inflation for coke, petroleum, chemicals, rubber, and plastic products increased to 2.7% from 0%, mainly due to a rise in petrol prices, which increased by 3.3% following a 3.7% drop in December.
Producer prices for the months ahead are facing pressure from fuel price hikes implemented in February, with another building for March, which is underpinned by the higher global oil price and weak rand.
Nedbank economist Johannes Khosa said they expected producer inflation to remain relatively subdued in 2024.
Khosa said the downward pressure would mainly emanate from Brent Crude oil prices, which will be subdued by weak global demand and translate into lower fuel prices.
“Food prices will also start to moderate faster as the impact of the temporary supply shocks in the poultry industry fade,” he said.
“However, there is a risk that some upward pressures on producer inflation could emerge again due to the uncertain outlook for the global oil market, the volatile rand, and higher local input costs.
“The excessive heat in some parts of the country experienced in the past few weeks, probably associated with El Niño weather pattern, is another concern and could still affect agricultural production and food prices.
“Persistent logistical problems at Transnet’s ports, resulting in increased backlogs and clogging up domestic supply chains, could also lead to shortages of goods and services, resulting in price spikes. We forecast PPI to average around 6% in 2024, down from 6.9% in 2023.”
On a monthly basis, Stats SA said producer prices rose by 0.1% in January, after a 0.6% decrease in December, and matching market forecasts.
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