Picture: SYDNEY SESHIBEDI
Picture: SYDNEY SESHIBEDI

Factory and farm-gate inflation, as measured by the annual change in the producer price index (PPI), accelerated to 6.1% in July from 5.9% in June.

This was slightly higher than the Bloomberg consensus of 6%.

Producer inflation was expected to accelerate in July on the back of the rise in petrol and diesel prices due to the weaker rand. July saw the fourth consecutive rise in fuel prices this year, albeit not as steep, of 23c/litre and 26c/litre for petrol and diesel respectively which weighed on Thursday’s PPI figure.

This translated to diesel’s contribution to PPI showing 31.6% annual inflation in July, and a 1.6% jump from June’s diesel prices. The petrol component of PPI showed 27.2% annual inflation and 1.5% inflation from the prior month.

The price of sugar for food manufacturers fell 8.1% in July from the same month in 2017, and grain mill products got 6% cheaper. This contributed to an overall deflation of 1% from food producers.

PPI, which was set to 100 points in December 2016, came in at 108.5 points in July, up from June’s 107.8 points.

Producer inflation has traditionally been seen as giving an indication of the consumer inflation figure three months later. The annual change in the consumer price index (CPI) is the key measure of inflation used by the Reserve Bank to set interest rates.

However, given the speed of modern logistics, producer inflation increasingly moves in tandem with consumer inflation. Last week, Statistics SA reported the annual change in July’s CPI accelerated to 5.1% from 4.6% in June.

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