Cape Times

Producer price inflation eases in February


PRODUCER price inflation eased in February, Statistics South Africa data shows.

In its economic insights released on Thursday, Nedbank said the PPI surprised to the upside after slowing to 4.5% in February from 4.7% in January, which was contrary to their and the market’s forecast for an accelerati­on to 4.9%.

Statistici­an-General Risenga Maluleke said the producer price index (PPI) increased by 0.5% month-on-month in February.

The main contributo­rs to the headline PPI annual inflation rate were food products, beverages and tobacco products which increased by 4.3% year-onyear and contribute­d 1.2 percentage points; coke, petroleum, chemical, rubber and plastic products which increased by 4% year-on-year and contribute­d 1 percentage point; and metals, machinery, equipment and computing equipment which increased by 5.2% year-on-year while contributi­ng 0.7 of a percentage point.

The contributo­rs to the headline PPI monthly increase were coke, petroleum, chemical, rubber and plastic products, which increased by 1.5% monthon-month and contribute­d 0.4 of a percentage point; and food products, beverages and tobacco products which increased by 0.5% month-on-month and contribute­d 0.1 of a percentage point.

Nedbank said inflation for food, beverages and tobacco products picked up pace in February, rising to 4.3% from 4%, after three consecutiv­e months of moderation.

It said most of the upwards pressure came from fruit and vegetable prices, which accelerate­d further to 13.9% yearon-year (y/y) – the highest since June 2016 from 11.8%, reflecting the impact of seasonal factors and drier weather conditions.

Price of meat and meat products remained elevated at 4.3%, reflecting the lingering effect of supply shortages which resulted from the bird flu outbreak towards the end of last year. Inflation for other food products also rose noticeably due to faster price gains in “other food” and higher sugar prices.

While sugar prices remained high at 14.8%, they have moderated significan­tly from their peak of 28% in October. On the downside, price of oils and fats (down 17.8%) continued to benefit from subdued global prices, which are also coming off an extremely high base. Price of starches, starch products and animal feeds remained in contractio­n territory for the seventh consecutiv­e month, down by 10.8%, Nedbank said.

It added that inflation for “coke, petroleum, chemicals, rubber, and plastic products” quickened to 4% from 2.7% due to a rise in petrol prices, which increased by a further 5.8% y/y from 3.3%. This outweighed the impact of the continued decline in diesel prices and a moderation in chemical, rubber, and plastic prices, it said.

Nedbank said the price of transport equipment eased to 5.6% y/y from 7.3% due to a decelerati­on in motor vehicles and parts prices.

Lara Hodes, an economist at Investec, said the monthly lift stemmed predominan­tly from the coke, petroleum, chemical, rubber and plastic products grouping.

“Specifical­ly, it contribute­d 0.4 of a percentage point to the monthly PPI reading, underpinne­d by petrol and diesel price hikes in February.

Moreover, further notable fuel price hikes were implemente­d in March, underpinne­d by the higher global oil price and a subdued rand, which would add upwards pressure to the month’s reading,” Hodes said.

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