PPI down in February - Stats SA

Cape Town - The latest Producer Price Index (PPI) released by Statistics SA on Thursday shows that PPI fell to 4.2% year-on-year (y/y) in February from 5.1% y/y in January.

In its PPI report Stats SA said the main contributor to the annual rate of 4.2% was coke, petroleum, chemical, rubber and plastic products.

Investec chief economist Annabel Bishop said the decrease was mainly due to food price deflation. Grain mill product prices fell 17.2% y/y, for instance. She also pointed out that statistical base effects played a part as PPI inflation rose significantly a year ago.
 
"The lag between maize prices and Consumer Price Index (CPI) food price inflation means some further downwards price pressure is likely this year," said Bishop.

"We continue to expect consumer food price inflation will remain in low single digits this year, helping to keep CPI inflation below 5% y/y for the year."
 
The Stats SA data shows that the diesel price fell by 17c/litre in February, and in March a 47c/litre cut occurred on rand strength.

"However, in April around a 60c/litre hike will occur on the back of the hikes in government taxes and levies announced in the 2018 Budget. We expect the oil price to average $66/bbl this year," she said.
 
"PPI inflation is likely to come out at 3.8% y/y for 2018 as food price inflation remains suppressed, the rand’s previous strength feeds through somewhat further and base effects from 2017’s drought continue to unwind."

Bishop said other commodity prices which placed upwards pressure on the annual PPI inflation rate in February were paper and paper products and non-metallic mineral products.

The annual percentage change in the PPI for intermediate manufactured goods was 0.4% in February 2018 compared with 1.5% in January 2018.

The annual percentage change in the PPI for electricity and water was 3.5% in February 2018 compared with 3% in January 2018.

The annual percentage change in the PPI for mining was -4.3% in February 2018 compared with -0.1% in January 2018.

The annual percentage change in the PPI for agriculture, forestry and fishing was 5.7% in February 2018 compared with 8.7% in January 2018.

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