PPI eases in July

Johannesburg – The Producer Price Index for final manufactured goods, which measures inflation at the factory gate, eased to 3,3 percent in July compared to July last year, down from 3,7 percent in June, Stats SA reported on Thursday.

PPI indicates what may happen to prices in the months ahead as wholesalers pass price increases to retailers who in turn pass these on to consumers. The largest increase was in the food, beverages and tobacco products, which rose 5,4 percent.

PPI for intermediate manufactured products, which are still to be used as inputs or processed, fell by 0,3 percent suggesting that there is less pressure elsewhere on the value chain.

PPI for water and electricity rose 12,2 percent indicating intense pressure for prices of the two vital basic goods to rise over the next few quarters. As the prices are regulated, increases are at specific intervals reflecting built-up producer inflation pressure over the preceding year.

PPI provides the pipeline pressure that will see consumer inflation breach the Reserve Bank’s upper target of six percent. in the first quarter of next year.

ANA