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Food and fuel helped bring producer inflation down further, though the rise in the producer price index was a little bigger than expected.
Food and fuel helped bring producer inflation down further, though the rise in the producer price index was a little bigger than expected.

Producer inflation continues to slow


By Sunita Menon - Aug 31st 2017, 14:00

Producer inflation slowed further in July, following a surprisingly sharp slowdown in June, thanks largely to food and fuel price dynamics. 

The producer price index (PPI) for final manufactured goods — the headline figure — rose 3.6% in July from a year earlier, down from 4% in June.

That was slightly higher than expectations, though: Investec had projected PPI inflation to moderate slightly to 3.3% year on year in June while Trading Economics expected inflation to moderate to 3.4%.

From June 2017 to July 2017 the PPI for final manufactured goods increased by 0.5%.

Food and fuel price dynamics were key influencing factors on the headline PPI outcome.

The easing of the drought and improved agricultural production has continued to bring down food prices. At 25.17%, the food category is the largest portion of PPI.

The main contributors to the annual rate were food products, beverages and tobacco products, which contributed 1.2 percentage points; wood and paper products, which contributed 0.7 percentage points; and coke, petroleum, chemical, rubber and plastic products, which contributed 0.1 percentage points.

The Reserve Bank’s monetary policy committee (MPC) cut interest rates in July, by 25 basis points to 6.75% from 7%.

July’s consumer price index (CPI), released last week, showed inflation eased to 4.6% year on year from 5.1% in June — falling below the 5% mark for the first time since November 2015.

If inflation continues to moderate, economists expect another cut in rates at the next MPC.
© BusinessLIVE MMXVII 

Read more about: sa economy | producer | ppi | inflation

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