Producer prices surge

Producer prices for final manufactured goods accelerated slightly above market expectations, marking the sixth straight month of double-digit producer inflation and the highest reading since records began in 2013, Stats SA said on Thursday.

SA’S producer price index (PPI), which measures changes in the prices of goods bought and sold by manufacturers, climbed 14.70% in May, up from 13.1% the previous month.

The reading topped market estimates of 14.1% and Bloomberg’s median estimate of 14.0%.

PPI increased 1.8% month on month in May, the same pace as in April but above market forecasts of a 1.3% increase.

PPI data is a key indicator of inflation rates that consumers might face in the future because firms generally pass higher input costs on to customers, though sometimes a lack of demand may limit their ability to do so.

Stats SA data shows that the main contributors to the headline PPI annual inflation rate were coke, petroleum, chemical, rubber and plastic products; food products, beverages and tobacco products; and metals, machinery, equipment and computing equipment.

Coke, petroleum, chemical, rubber and plastic products increased 2.8% month on month and contributed 0.8 of a percentage point; and food products, beverages and tobacco products increased by 1.5% month on month and contributed 0.4 of a percentage point.

The rising price pressure on SA’S producers is consistent with what is being observed elsewhere in the world, with most of it coming from energy and food, a situation that has been made worse by Russia’s invasion of Ukraine.

FNB economists said the double-digit producer inflation still reflected elevated supply chain pressures, with manufacturing surveys reflecting concerns over raw material shortages.

“This, together with the subdued domestic demand recovery and concerns of sharp global growth moderation, does not bode well for manufacturing activity,” said FNB.