File image: IOL. (Denis Farrell /AP).

CAPE TOWN - Mounting fuel prices recently fueled producer inflation, which rose to 5.2% in September, says an economist in a recent media report. 

Statistics South Africa (StatsSA) released the Producer Price Index (PPI) for September on Thursday. 

According to the PPI, month-on-month inflation increased 0.7% whilst annual PPI for August was 4.2%.

The main contributors to annual inflation were:

- Coke

- Petroleum

- Chemical

- Rubber and plastic with 2.4 percentage points

This was followed by food products, beverages and tobacco products with a contribution of 0.9 of a percentage point.

Wood and paper products lagged behind with 0.7 of a percentage point.

Coke, petroleum, chemical, rubber and plastic also made the biggest contribution to the monthly inflation with 0.6 of a percentage point.

Notably, the increase in producer inflation is attributed to the rising petrol and diesel prices in September this year. 

"A key influencing factor on this component will have been the substantial 67 and 44c/litre price increases for petrol and diesel respectively in the month of September", explained Investec economist Kamilla Kaplan.

Kaplan explained that given the revised expectations of the deficit, which is now 4.3% of GDP, compared to the 3.1% Treasury expected in February, the risk of a credit downgrade to junk status is higher.

“Rand weakness will lift inflation which eliminates the scope for any further interest rate cuts in the current cycle", she said.

Other products 

The data revealed that inflation for intermediate manufactured goods was only up 2.1% in September, compared to 2% reported in August. This leaves the month-on-month change at 0.1%.

However, electricity and water inflation was 6% in September compared to 2.6% reported in August. The month-on-month rate thus fell by 22%.

Agriculture, forestry and fishing inflation was 2% in September, compared to -0.9% in August. Month-on-month a change of 2.2% was reported. 

However, Independent Newspapers reported in May this year that producer inflation took a dive in April. 

PPI thus reached its lowest level in almost 18 months. 

The Producer Price Index (PPI) inflation moderated from 5.2% year-on-year in March to 4.6% in April, down from a peak of 8.1% in February, 2016.This was the weakest PPI inflation since November, 2015 when prices went up 4.3%.

Despite this, an analyst at Treasury, Allet Opperman cautioned against placing too much emphasis on the rand strength. 

This was at the onset of President Jacob Zuma's motion of no confidence during the ANC national executive committee meeting.

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