More relief for businesses and consumers in South Africa.

South Africa’s Producer Price Inflation (PPI) eased in June 2023 to 4.8%, down significantly from the rate of 7.3% in May 2023.

The PPI is now at its lowest point since March 2021, when it was recorded at 5.2%, and is far off from the peak hit in July 2022 when it reached 18%.

This points to much lower production costs in the country – which spells great news for South Africa’s headline consumer inflation rate going forward.

According to Businesstech.co.za, the country’s latest CPI figures already showed a significant drop in CPI for June to 5.4%, down from 6.3% YoY in May, bringing the inflation rate within the Reserve Bank’s target range.

The easing of headline inflation contributed to the Reserve Bank’s Monetary Policy Committee holding on interest rates at its latest meeting.

While the central bank has warned that the interest rate hike cycle has only been paused – saying that future hikes could be coming, depending on the data – the PPI indicates that consumer prices will continue to ease.

According to Stats SA, while headline PPI has dropped significantly, some sectors are still seeing higher production costs.

Specifically, food products, beverages and tobacco costs increased by 6.4% year-on-year and contributed 1,6 percentage points to the rate.

Paper and printed products increased by 14.5% year-on-year; transport equipment increased by 11.3% year-on-year; and metals, machinery, equipment and computing equipment production costs increased by 6.2% year-on-year.

Conversely, coke, petroleum, chemical, rubber and plastic product production costs decreased by 1.6%, the stats body said.

Production costs are affected by a host of factors – in South Africa, a weaker rand and permanent load shedding have been some of the key local contributors to these costs.

This is how the various sectors performed:

• Final Manufacturing: Annual producer price inflation was 4.8% in June 2023, down from 7.3% in May 2023. The producer price index (PPI) decreased by 0.3% month-on-month in June 2023.

• Intermediate Manufacturing: The annual percentage change in the PPI was 2.4% in June 2023 (compared with 4.4% in May 2023). The index decreased by 1.3% month-on-month.

• Electricity and Water: The annual percentage change in the PPI was 13.6% in June 2023 (compared with 15.5% in May 2023). The index increased by 34.8% month-on-month.

• Mining: The annual percentage change in the PPI was 2.8% in June 2023 (compared with 7.2% in May 2023). The index decreased by 2.6% month-on-month.

• Agriculture, Forestry and Fishing: The annual percentage change in the PPI was 6.2% in June 2023 (compared with 4.5% in May 2023). The index increased by 0.8% month-on-month.