The unexpectedly large surge in producer price inflation to almost 6% in June, mainly as a result of fuel price pressures, bodes ill for SA’s inflation trajectory and interest rate outlook. Headline producer price inflation (PPI) accelerated from 4.6% in May to 5.9% in June, according to figures released by Stats SA on Thursday. This far exceeded the market consensus for an increase to 5.2%. The main driver was the petroleum category, which added 3.1 percentage points to the headline figure. This reflects the fact that petrol and diesel prices rose by 82c/l and 85c/l, respectively, in June as a result of a higher international oil price and a weaker rand. Fuel prices rose again in July, by a further 23c/l for petrol and 26c/l for diesel, suggesting that the PPI is set to keep climbing. However, the Department of Energy does not expect petrol price increases in August. Investec economist Lara Hodes notes that, fortunately, food price dynamics exerted a dampening influence on manufact...
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