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More increases in producer prices expected

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Producer prices in South Africa are expected to continue rising in the short term after increasing the most in two-and-a-half years last month.

Meat and meat products inflation rose to a marked 12 percent, from 8 percent in March. Photo: File

JOHANNESBURG – PRODUCER prices in South Africa are expected to continue rising in the short term after increasing the most in two-and-a-half years last month.

Data from Statistics South Africa (StatsSA) yesterday showed that the producer price index (PPI) for final manufactured goods jumped by 6.7 percent in April from the same month a year earlier.

PPI was pushed up by the prices of coke, petroleum, chemical, rubber and plastic products, food, beverages and tobacco and metals products. The April PPI print was slightly below market expectations of 6.8 percent.

The jump followed a 5.2 percent rise in March and a low level of 3.5 percent in January. StatsSA said this was the highest producer inflation rate since November 2018.

Coke, petroleum, chemical, rubber and plastic products increased by 11.9 percent, while metals, machinery, equipment and computing equipment rose by 8 percent.

Meat and meat products inflation rose to a marked 12 percent, from 8 percent in March, while inflation within the dairy and “other food” products categories eased somewhat.

Investec economist Lara Hodes said PPI rose in April largely on the increase in the coal and petroleum products category.

“A marked rise in inflation within coke, petroleum, chemical, rubber and plastic products grouping, in which fuel price dynamics are captured, largely underpinned the notable lift in the headline outcome,” Hodes said.

“Low statistical base effects generated by the pandemic are expected to buoy both annual consumer price inflation and PPI readings in the short term,” she said.

On a monthly basis, producer prices went up by 0.7 percent after a 1.3 percent rise in the previous month, and slightly below market consensus of a 0.8 percent increase.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said the rise in PPI was indicative of the cost pressures manufacturers were facing as a result of rising input costs.

Seifsa chief economist Chifipa Mhango said contributing factors to this increase included rising transport and energy costs, as well as mining products.

Mhango said the uptick in PPI would continue.

“The PPI data shows that manufacturers are passing these costs on to consumers, which is also why we see a rise in consumer price inflation, which rose to 4.4 percent in April,” he said. “Global PPI will pick up, along with oil prices and mining producer prices.”

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