Producer inflation surprises with sharp slowdown

Factory and farm gate inflation measured by the producer price index (PPI) decelerated sharply to 6.6% in September, surprising economists who expected only a small drop from August’s 7.2%.

The slowdown was helped by a 4.5% decrease in the petrol component of PPI along with diesel prices remaining level from August 2015.

Investec economist Annabel Bishop noted that the diesel price was cut by 48c a litre in September, but in October there was a 23c increase and a much larger increase looks likely for November — estimated at 63c — as oil prices have risen.

Statistics SA’s figures indicated some relief to consumers suffering from high food prices due to the drought.

Overall food producer inflation slowed slightly to 13.1% from 13.4%.

Annual grain mill product inflation slowed to 18.9% from the prior month’s 20.4%.

Sugar price inflation, however, accelerated to 33.2% from 32.5%.

“The good news is that planting for a number of crops is likely to increase substantially next year on higher expected rainfalls, which should moderate food price inflation, and so help to reduce CPI and PPI inflation,” Bishop said.

With Staff Writer