Producer inflation drops in March, with total cost of food production falling 1.2%
By Sunita Menon - May 3rd 2018, 14:13
Farm and factory gate inflation, as measured by the annual change in the producer price index (PPI), decelerated to 3.7% in March from 4.2% in February.
As expected, the fall was similar to March’s consumer price index (CPI), which dropped to its lowest level in seven years down to 3.8%, from 4% in February driven by a decline in the fuel price and low food price inflation.
The main contributors were coke, petroleum, chemical, rubber and plastic products (1.2 percentage points), transport equipment (0.7 of a percentage point) and paper and printed products (0.6 of a percentage point).
Statistics SA reported that the cost of food production fell by 1.2%.
Items that were cheaper in March included oils and fats, grain mill products, starches and starch products, animal feed and sugar.
Electricity and water prices remained at 3.5%.
FNB chief economist Mamello Matikinca had expected to see a further drop in food producer inflation in March given the high base of early 2017 but warned that there would be a mild acceleration in the following months as base effects become less favourable.
"This will likely represent the trough in the cycle, after which inflation will begin to inch higher, particularly in light of the recent oil price acceleration," she said.
Investec economist Lara Hodes said she expected PPI to have eased to 4%.
"A decrease in petrol and diesel price pressure in March of 36c and 47c/l, respectively, and sustained low food price inflation, will again be the main drivers of the low PPI number," she said.
From February 2018 to March 2018, the PPI for final manufactured goods decreased by 0.2%.
BNP Paribas expected headline PPI to drop to 4% year-on-year in March because of the stronger currency, subdued manufactured food prices and softer fuel costs, while macroeconomics website Trading Economics expected PPI to moderate to 4%.
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