The data, released on Thursday by Statistics South Africa (Stats SA), clearly underscores the inflationary vice that has the South African — and for that matter the global — economy firmly in its grip. Consumers will ultimately pay even higher prices for a range of goods as a result. 

At 16.2% year on year, domestic PPI is now at its highest level since August 2008, when it reached 19.1%. CPI is at a 13-year high, though at a more subdued 7.4%. 

The South African Reserve Bank will see this data as further evidence that its 75-basis point rate hike last week — which took the cumulative rise in rates since November last year to 200 basis points and the prime rate to 9% — was not excessive. Critics would counter that inflation is being fanned by external factors, including Russia’s invasion of Ukraine, and that higher rates will do little to contain price pressures while suppressing domestic demand that is already muted. 

“The main contributors to the headline PPI annual inflation rate were coke, petroleum, chemical, rubber and plastic products, food products, beverages and tobacco products, and metals, machinery, equipment and computing equipment,” Stats SA said.

The coke and petroleum basket of products saw producer inflation of 37.2% in the year to June, while food, beverage and tobacco products cost over 10% more. 

There may at least be some relief at the fuel pumps in August. The Department of Minerals and Energy noted earlier this week that while the reduction in the general fuel levy ends on 2 August, “there will still be a sizable reduction in fuel prices, including paraffin, for South Africans. A formal announcement in this regard will be made by the end of the week”.

Global crude prices have fallen about 10% in July, in large part because the global economy is slowing and may well be tipping into a recession, as the International Monetary Fund warned this week. 

Read in Daily Maverick: “IMF warns of global recession as inflation surges, with South Africa unlikely to escape”

Many economists remain of the view that South African inflation will peak this quarter. Time will tell if this is indeed the case. Regardless, interest rates are still expected to maintain their climb. In central bank speak, it’s called “policy normalisation”, which is surely ironic as there is little that is normal about the South African or global economy at the moment. DM/BM