Business Maverick


SA factory gate price inflation brakes in March, food price pressures ebb

SA factory gate price inflation brakes in March, food price pressures ebb

South Africa’s Producer Price Index slowed year-on-year in March to 10.6% from 12.2% in February, Statistics South Africa said on Wednesday. This holds out hope that consumer inflation may also soon resume its braking trend. And in a welcome development, pressures in the food price production pipeline abated significantly.

The South African Producer Price Index (PPI) has been slowing steadily since July last year when it raced to a 14-year high of 18%. It’s not in single-digit territory yet, but is heading in that direction.

In a hopeful sign, the food component of PPI braked to 11.7% in the year to March, from 13.7% in February. Food inflation in South Africa has remained stubbornly high, with the power crisis playing a central role as it raises production costs while disrupting supply chains.

Food price inflation for consumers accelerated to 14.4% year on year in March, from 14% in February, adding fuel to the flames of a cost-of-living crisis that is burning a hole in household incomes, especially among the swelling ranks of the poor. 

inflationOverall, the consumer price index (CPI) picked up pace in March to 7.1% on an annual basis, from 7% in February.

Read more in Daily Maverick: Cost-of-living crisis – SA CPI accelerates to 7.1% in March, food inflation at 14-year high

“There is around a month lag between food prices at the production and retail level, and the moderation in agricultural PPI food price inflation should have some suppressing influence on CPI food price inflation,” Investec chief economist Annabel Bishop said in a note on the PPI data.

More broadly, economists noted that the easing of the PPI came in the face of rising diesel prices.

“This shows that price pressures are abating despite a diesel price increase in March. This bodes well for disinflation. The key takeaway is that CPI, while sticky, should also start abating,” Jee-A van der Linde, an economist with Oxford Economics Africa, told Business Maverick.

While ebbing, price pressures remain in place and the South African Reserve Bank sees the additional costs of doing business as a result of the electricity crisis adding 0.5 percentage points to the domestic inflation rate this year.

Read more in Daily Maverick: Rolling blackouts expected to add 0.5 percentage points to SA inflation in 2023 – Sarb

“… while price pressures eased at the agricultural level, in the complex food production chain, costs get added along the way as processing occurs, and retailers have been under pressure from investing in electricity self-generation, if possible,” Investec’s Bishop said. DM/BM


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