Global Courant 2023-05-25 18:31:46
South Africa’s most recent producer price inflation (PPI) for April 2023 fell significantly from 10.6% in March to 8.6%.
According to Nedbank’s latest Producer Inflation report, the decline beat market forecasts of 9.5%.
Statistics South Africa released its most recent figures on Thursday (May 25), showing that the ‘coke, petroleum, chemicals, rubber and plastic products’ category was the main contributor to the year-on-year decline in overall PPI inflation.
The PPI for intermediates fell to 4.6%, after remaining unchanged at 5% in February and March, dragged down by price declines of ‘chemicals, rubber and plastics’ and ‘basic iron and steel’.
Mining PPI fell sharply from 17.1% to 10.5%, driven by a fall in ‘non-ferrous metal ores’ and a sharp drop in ‘coal and gas prices’, reflecting the impact of an increase in the cost of mining. ‘quarries’ compensated. clay and diamonds’.
The PPI for agriculture, forestry and fisheries fell from 7.5% to 6% mainly due to lower prices of ‘cereals and other crops’, overshadowing the impact of higher prices of ‘fruits and vegetables and ‘milk and eggs’ .
PPI for electricity and water increased from 10.1% to 13.1% as prices of both electricity (14.1% from 10.8%) and water (8.1% from 7.2%) increased
In short, this decline could cause consumer inflation to tip downwards, especially in food and fuel.
In April 2023, Statistics South Africa (Stats SA) released the Consumer Price Index (CPI), showing a 6.8% decline.
Despite being marginal, it exceeded market forecasts and can be attributed to lower fuel inflation leading to a positive impact on transportation costs.
“The rapid slowdown in producer inflation will help limit the pass-through to consumer inflation. We expect producer prices to moderate further in the coming months, supported by last year’s higher base and lower international commodity prices,” said Nedbank.
“This will include the prices of petroleum products, including diesel and gasoline. Food prices are also expected to start falling as the lagged effect of lower global food prices seeps through the economy, while favorable weather earlier this year will support local food supplies.”
However, Nedbank noted that there is a risk that inflation will come down slower than expected, as the benefits of lower global prices will be partly offset by the weaker rand.
The local currency would remain under pressure as global risk appetite falters amid the global economic downturn and investors remain wary of South Africa, with the electricity shortage hurting domestic growth prospects, diplomatic tensions simmering on the looming BRICS summit and the political rhetoric is likely to harden in future elections this year, Nedbank said.
Nedbank added that at the same time, the load shedding would continue to drive up local input costs, forcing companies to use diesel generators to produce electricity or absorb the costs of installing alternative electricity sources.
The chart below shows the year-over-year rate of change for PPI:
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