---
title: "SA annual factory gate inflation eases to 2.7%, lowest level in almost three years"
description: "Some more glad tidings on the inflation front. South Africa’s Producer Price Index (PPI) hit the brakes year on year to 2.7% in July, its lowest level since October 2020, from 4.8% in June. That raises the prospects of the South African Reserve Bank holding rates steady when its Monetary Policy Committee (MPC) meets later in September."
type: "NewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "ECONOMIC OUTLOOK"
author: "Ed Stoddard"
author_url: "https://www.dailymaverick.co.za/author/ed-stoddard/"
canonical_url: "https://www.dailymaverick.co.za/article/2023-08-31-sa-annual-factory-gate-inflation-eases-to-2-7-lowest-level-in-almost-three-years/"
published: "2023-08-31T21:11:21"
lang: "en-ZA"
word_count: 344
---

# SA annual factory gate inflation eases to 2.7%, lowest level in almost three years

> Some more glad tidings on the inflation front. South Africa’s Producer Price Index (PPI) hit the brakes year on year to 2.7% in July, its lowest level since October 2020, from 4.8% in June. That raises the prospects of the South African Reserve Bank holding rates steady when its Monetary Policy Committee (MPC) meets later in September.

By Ed Stoddard · Published 31 August 2023, 23:11 SAST

## Key points
- South Africa's inflation woes are starting to ease, with PPI and CPI both moderating in July, thanks to cooling fuel prices and a bumper grain harvest.
- Inflation in South Africa is finally being brought to heel, with PPI at 2.7% in July.
- Cooling fuel prices played a major role, detracting -2.5% points from the headline reading.
- The Consumer Price Index (CPI) slowed to 4.7%, signalling that the central bank will likely hold rates steady again.
- Producer food inflation remains a key driver of the overall rate, but both are at least slowing in line with global trends.

## Content

Inflation in South Africa is finally being brought to heel, and that is good news for hard-pressed consumers grappling with a cost-of-living crisis against the backdrop of record levels of unemployment and inequality.

PPI was 2.7% on a year-on-year basis in July, down from 4.8% in June. This was its lowest read since October 2020 when it was also 2.7% and the economy and demand pressures were groaning under the weight of Covid lockdown measures. In July last year, PPI was running at a blazing rate of 18%.

Cooling fuel prices played a major role.

![Image](https://www.dailymaverick.co.za/wp-content/uploads/2023/08/Screenshot-2023-08-31-at-18.09.07.png)

“Fuel price dynamics are largely responsible for the annual moderation in the headline PPI reading. It detracted -2.5% points from the headline reading in July, versus -0.8 of a % point in June. Specifically, petrol price inflation slid by a notable -18.5% y/y, from a contraction of -8.2% previously, while diesel prices fell by a further marked -23.3% y/y (-16.2% y/y previously),” Investec economist Lara Hodes noted in a commentary on the data.

This comes after the Consumer Price Index (CPI) slowed to 4.7% in July from 5.4% in June, taking the inflation measure for consumers to near the midrange of the SA Reserve Bank’s 3% to 6% target range. That, in turn, signals that the central bank will likely hold rates steady again, as it did in July, when the MPC next meets later this month.

**Read more in Daily Maverick:**[SA Reserve Bank holds rates steady, but Kganyago’s finger remains on the hiking trigger](https://www.dailymaverick.co.za/article/2023-07-20-sa-reserve-bank-holds-rates-steady-but-kganyagos-finger-remains-on-the-hiking-trigger/)

Its key repo rate currently stands at 8.25% and the prime lending rate at 11.75% after the MPC hiked rates by 475 basis points since November 2021.

Still, there are causes for concern.

At 6.8%, producer food inflation remains a key driver of the overall rate and that will keep feeding into consumer food inflation, which remained an income-sapping 10% in July. Poor households especially bear the brunt of this burden.

But both are at least slowing in line with global trends, and South Africa is reaping a bumper grain harvest currently. **DM**