Picture: ISTOCK
Picture: ISTOCK

Factory and farm gate inflation, as measured by the annual change in the producer price index (PPI), accelerated faster than expected in October due to record fuel prices.

The PPI for final manufactured goods was 6.9% in October 2018 from 6.2% the previous month.

The Bloomberg forecast was 6.3%.

The main contributors were fuel coke, petroleum, chemical, rubber and plastic products at 3.7 percentage points and transport equipment at 0.8 of a percentage point.

Motorists were hit hard by record high fuel prices in October after receiving a reprieve in September when government tapped into the slate levy to fund the increase.

Petrol increased by 24.1% compared with a year ago and was up 6.7% compared with September. Diesel increased by 28.9% compared with a year ago and by 6.7% compared to the month before.

Producer inflation is expected to ease for the rest of the year as fuel pressures subside.

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. But, given the speed of modern logistics, producer inflation increasingly moves in tandem with consumer inflation.

Last week, data from Stats SA showed that consumer inflation accelerated to 5.1% in October.

The Reserve Bank’s monetary policy committee at its recent meeting increased the repo rate for the first time in two years in response to long-term risks to inflation.

menons@businesslive.co.za