CONSUMERS will continue forking out a bit more for goods as prices remained elevated at a 5-year high in September after upside risks to producer inflation materialised.
Data by Statistics South Africa (StatsSA) on Thursday showed that annual headline producer price inflation (PPI) for final manufactured goods jumped to 7.8 percent in September, from 7.2 percent in August.
This was the largest annual rise in headline PPI since February 2016 when the rate was 8.1 percent.
StatsSA said this PPI reading was influenced mainly by prices of petroleum-related products.
Chief economist for the Don Consultancy Group (DCG), Chifi Mhango, said rising PPI rate was reflective of cost pressures of industrial activity in the global economy amid supply chain bottlenecks and rising energy costs to an extent.
Globally, PPI rate is trending upwards with China's producer prices rising for a ninth straight month in September, increasing by 10.7 percent year-on-year.
“A high PPI rate especially for inputs related products has put pressure on the industrial cost base of the South African economy, and as producers pass on cost increases to consumers,” Mhango said.
“It has a negative impact on the overall inflation rate outlook for the South African economy.”
StatsSA also said prices for intermediate manufactured goods increased to their highest level this year at 19.5 percent in September, reflective of cost pressures in final manufactured goods.
Electricity and water tariffs surged by 23.3 percent from 17.5 percent in August while annual producer inflation in agriculture, forestry, and fishing rose to 9.6 percent in September from 8.6 percent a month earlier.
FNB economist Thanda Sithole said inflationary pressures were still persistent among the producer prices of coke, petroleum, chemical, rubber and plastic products.
Sithole said they projected a new producer inflation peak of 7.8 percent in November on the back of elevated oil prices.
“However, today’s outcome shows that inflationary pressures are more substantial than we envisaged,” Sithole said.
“Producer inflation should remain sticky over the near term and could test north of 8 percent between October and December before moderating in 2022.”
On a month-on-month basis, StatsSA said producer prices increased by 0.9 percent in September, following a 0.8 percent month-on-month increase in August.
Nedbank senior economist Nicky Weimar said pressure from stubbornly high global food prices will probably keep global producer inflation elevated for some time.
“The return of load-shedding, particularly stage four, will hamper productivity capacity,” Weimar said. “Although prices will likely remain elevated into early 2022, the price pressures are projected to moderate over most of the year.”
BUSINESS REPORT ONLINE