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Producer inflation rises to 4.2%

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Prices at the factory gate shot up in October to 4.2%, mostly because of higher costs for food, alcohol and tobacco products.

Statistics SA said on Thursday that October’s annual percentage change in the producer price index (PPI) was 4.2%, up from 3.6% in September.

From September 2015 to October 2015 the PPI for final manufactured goods increased by 0.9%.

The PPI impacts on the consumer price index (CPI) and thus inflation, and this increase will likely be felt by consumers. The CPI was 4.7% in October 2015, up from 4.6% in September 2015, but lower than the 4.9% expected by experts The Inflation Factory.

South Africa’s economy is struggling to grow, putting strain on consumers battling inflation, unemployment, low growth opportunities and a weakening rand. The gross domestic product (GDP) edged marginally higher by 0.7% in the third quarter, after contracting by 1.3% the previous quarter.

The PPI of food, beverage and tobacco products went up by 6.2% year-on-year and contributed 2.1 percentage points to the increase. The PPI for food and paper products went up by 7.6% y/y, but only contributed 0.8 of a percentage points to the increase.

The PPI for electricity and water was 13.5% in October 2015, compared with 11.3% in September 2015. From September 2015 to October 2015 the PPI for electricity and water decreased by 2.4%.

The PPI for mining was -0.8% in October 2015, compared with -5.2% in September 2015. From September 2015 to October 2015, the PPI for mining increased by 1.1%.

The PPI for agriculture, forestry and fishing was 6.8% in October 2015, compared with 5.2% in September 2015. From September 2015 to October 2015 the PPI for agriculture, forestry and fishing increased by 2.9%.

The drought, low commodity prices and visa restrictions could shift the country into a recession by early next year, Mike Schussler, director of economists.co.za, warned this week following the release this week of the GDP numbers.

He warned that growth remains weak and will unlikely improve. “Many people are facing uncertainty in their jobs at present  and we’re seeing a slowdown in investment spending,” he said.

“For the average person…  it is a recession and feels like a recession because we are worse off than we were before,” he said.

Matthew le Cordeur, Fin24

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.