Consumers in South Africa may start seeing prices on the shelves normalising in the months ahead as producer prices for final manufactured goods at the factory gate continued the downward streak and fell to a two-and-a-half year low in June.
Data from Statistics South Africa (StatsSA) yesterday showed that most major categories had moderated further, amplified by the higher base established last year.
StatsSA said the annual producer price inflation (PPI) decelerated further to 4.8% in June, down from 7.3% in May.
This PPI reading was below consensus expectations of 5.8% to 6.3% year-on-year, the lowest level since February 2021 when the print was at 4.0% year-on-year.
These producer prices complemented the June consumer price inflation which fell to 5.4% from 6.3% in May as volatility in global trade eased.
StatsSA also said the slow June print was mainly due to a fall in prices of coke, petroleum, chemical, rubber and plastic products which declined to 2.9% from 3.6% in May, driven by the decline in the petrol and diesel price at the beginning of June.
When measured on an annual basis, petrol price inflation slid by a notable 8.2% year-on-year, from an increase of 7.2% previously, while diesel prices fell by a further marked 16.2% year-on-year from a decline of 8.2% previously.
This as the Brent crude price has fallen by around 21% when compared to the same period last year.
Metals, machinery, equipment and computing equipment also experienced a slowdown in the costs, falling to 6.2% from 7% in May.
Food products, beverages and tobacco products declined from 7% in May to 6.4% in June, the lowest reading recorded since March last year.
A breakdown of the food basket indicated that meat and meat product inflation eased to 1.1% in June from 1.7% in May, while prices of grain mill products, starches and starch products, and animal feeds declined markedly, to 10.8% from 15.4%.
Investec economist Lara Hodes said this showed that South Africa had benefited from the deceleration in global food commodity prices, with the UN Food and Agriculture Organization (FAO) food price index down a further 1.4% month-on-month in June.
Hodes noted the Agbiz report that said while food price inflation was projected to ease further, there were “renewed risks in global agriculture”, including the termination of the Black Sea grain deal initiative that aided exports of grains and oilseeds from Ukraine.
“Specifically, while South Africa has a substantial supply of domestic grains, with the 2022/23 maize harvest crop projected to be the second-largest harvest on record, South Africa is quite exposed to global shocks in its wheat value chain, which is a commodity that was primarily facilitated for exports through the Black Sea grain deal,” Hodes said.
Inflation within the paper and printed products sector eased to 14.5% from 15.5% in May, and transport equipment slowed to 11.3% from 12.8%.
On a monthly basis, producer prices fell 0.3% in June, after a 0.6% increase the previous month.
BUSINESS REPORT