Producer price inflation accelerates in March

Producer price inflation—or the increase in factory gate prices—was 7,3% year-on-year in March, up from 6,7% in February, Statistics SA said on Thursday.

“This rate is 0,6 of a percentage point higher than the corresponding annual rate of +6,7% in February 2011,” Stats SA said in a report.

Producer price inflation (PPI) measures the average changes in prices received by domestic producers for their output.

The higher annual rate was driven by increases in mining and quarrying, petroleum and coal products, basic metals, chemicals and chemical products, and metal products.

These increases were partially counteracted by decreases in the annual rate of change for other manufacturers, agriculture, and electrical machinery and apparatus.

Investec Group economist Annabel Bishop said the acceleration in PPI was due to “the ongoing strong, upward movement in international commodity prices.

“South Africa has failed to benefit significantly from the commodity boom, due both to policy uncertainty and insufficient logistics to meet export demand for these goods, but is seeing the full negative impact of the commodity boom in wholesale inflation,” she said in a statement.

Producer inflation for manufactured goods rose sharply to 5,9% year-on-year, up from 5,1%.

This showed “significant price pressure domestically for manufactured goods, due both to high commodity price inflation and sharply rising administered prices”, she said.

The strength of the rand had not helped to counter this, she added.

Bishop said the rise in PPI would likely put upward pressure on consumer price inflation, which could breach the inflation target of between 3% to 6% by the end of the year.—Sapa

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