South African producer price inflation (PPI) slowed to 4% year-on-year in December, from 4.6% in November, a favourable reading led by lower food and fuel prices.
Economists were expecting the figure to be higher.
On a month-on-month basis, the PPI was at 0.6% in December, the same as the previous month, Statistics South Africa data showed yesterday.
Investec economist Lara Hodes said the result was below Bloomberg’s consensus forecast of 4.3%.
Nedbank’s Economic Insights unit said they expected PPI to remain relatively subdued at around 6% this year, with downward pressure mainly from Brent crude oil prices, which would be subdued by weak global demand, and which would translate into lower fuel prices.
Food prices would also start to moderate faster as the impact of the temporary supply shocks in the poultry industry faded, the bank said.
Risks were an uncertain outlook for the global oil market, due to the volatile rand, higher local input costs, the El Niño weather pattern and issues at Transnet, which, if they persisted, could lead to shortages of goods and services, resulting in price spikes.
Producer inflation had decelerated faster than expected on lower fuel and food prices, which rose by 0.2% month-on month after falling by 0.8% in November.
“The biggest driver of the rise was an acceleration in prices of ‘meat and meat products’, and ‘dairy products’, while prices in all food products moderated. However, the upside pressure was partly contained by sharp declines in petrol and diesel prices,” Nedbank said.
The main contributors to the headline PPI were the “food products, beverages, and tobacco products”, “metals, machinery, equipment, computing equipment” and “transport equipment”, which added 1.2, 1 and 0.6 percentage points.
Inflation for food, beverages and tobacco products eased slightly to 4.6% from 4.7%. The price movements of the subcategories were mixed. Prices of “meat and meat products”, “fish and fish products” and “dairy products” accelerated slightly.
Hodes said prices of grain mill products, starches and starch products, and animal feeds moved further into contractionary territory, declining by -3.1% from -1.5%, supported by a -8.7% contraction in inflation of specifically starches, starch products and animal feeds.
Sugar prices eased for the second month but remained elevated. Meanwhile, the rate of deceleration “oils and fats” prices deepened from subdued global prices, which were coming off a high base.
Inflation for “coke, petroleum, chemicals, rubber, and plastic products” moderated further to 0% from 2.4%. The downward pressure mainly came from fuel prices, with petrol and diesel prices falling by 3.7% and 9.3%, respectively, reflecting the impact of lower global prices and a firmer rand.
However, this was partly offset by elevated prices of chemicals and rubber products. Prices of transport equipment jumped by 6.8% year-on-year after decelerating to 4.3% in November from a peak of 14.5% in March, while inflation for “metals, machinery, equipment and computing equipment“ was unchanged at 6.8%.
PPI for mining fell for the fourth consecutive month, down by 7.6% after dropping by 3.8% in November, with the faster deceleration resulting from non-ferrous metal ores, and coal and gas, offsetting a sharp acceleration in gold and other metal ores.
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