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Diesel’s contribution to PPI showed 10.6% annual inflation in April, and a 5% jump from March’s diesel prices.
Diesel’s contribution to PPI showed 10.6% annual inflation in April, and a 5% jump from March’s diesel prices.

Producer inflation jumps to 4.4% in April

ECONOMIC NEWS

By Robert Laing - Jun 7th 2018, 14:10

Factory and farm gate inflation, as measured by the annual change in the producer price index (PPI), accelerated to 4.4% in April from 3.7% in March.
 

Producer inflation was expected to accelerate in April when a range of higher taxes and levies introduced in the government’s 2018 budget took effect.

The 4.4% reported by Statistics SA on Thursday, however, was higher than the economists’ consensus of 4.2%.

Higher oil prices and taxes resulted in the government-set wholesale price of Gauteng diesel rising 69c/l and retail price of 95 octane petrol rising 72c/l in April.

This translated into diesel’s contribution to PPI showing 10.6% annual inflation in April and a 5% jump from March’s diesel prices.

The petrol component of PPI showed 8.9% annual inflation and 5.4% inflation from the prior month.

The one percentage point rise in value-added tax (VAT), taking it to 15%, appears to have been mitigated by better rain for farmers outside of the Western Cape.

The price of sugar for food manufacturers fell 15.1% in April from the same month in 2017, and grain mill products got 13.4% cheaper.

This contributed to an overall deflation of 1.4% from food producers.

PPI, which was set to 100 points in December 2016, came in at 106.1 points in April, up from March’s 105 points and 101.3 points in April 2017.

Producer inflation has traditionally been seen as giving an indication of the consumer inflation figure three months later. The annual change in the consumer price index (CPI) is the key measure of inflation used by the Reserve Bank to set interest rates.

But given the speed of modern logistics, producer inflation increasingly moves in tandem with consumer inflation.

On May 23, Statistics SA reported annual change in April’s CPI accelerate to 4.5% from March’s 3.8%.

BusinessDay 

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