Producer inflation eases slightly in September

Factory and farm gate inflation, as measured by the annual change in the producer price index (PPI), eased slightly in September.

The producer price index for final manufactured goods was 6.2% in September 2018 from 6.3% the previous month.

The main contributors were fuel (coke, petroleum, chemical, rubber and plastic products, three percentage points) and transport equipment (one percentage point).

While fuel increased by 23% compared with a year ago, it was up 0.4% compared with August.

This is after energy minister Jeff Radebe approved an urgent temporary fuel-price intervention measure to keep the petrol price capped at 5c/l in September, lifting some of the fuel price burden for the month.

Producer inflation is higher than consumer inflation, despite the petrol price reprieve, as indications provided by the manufacturing PMI and manufacturing confidence surveys suggest that producer price pressures continued to mount in the third quarter, said Investec economist Lara Hodes.

Investec projected producer inflation to moderate to 6%.

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.

On Wednesday, data from StatsSA showed that consumer inflation was unchanged at 4.9% in September.

The Reserve Bank’s monetary policy committee at its recent meeting kept the repo rate unchanged and is expected to keep this stance for the rest of the year.

menons@businesslive.co.za