'We expect producer price inflation to edge higher in the coming months, reaching around 4% by year-end.'
The Producer Price Index (PPI) rose to 2.3% in September, from 2.1% in August, with economists predicting a significant rise in the future.
PPI measures the average change in prices of goods and services produced by manufacturers and producers. It tracks inflation at the production level, showing how costs are changing for goods before they reach consumers.
Statistics South Africa (Stats SA) released the Index on Thursday, showing that PPI decreased by 0.1% month-on-month in September 2025, lower than Nedbank economists’ forecast. They noted that the highest level PPI has reached was in August 2024, at 2.8%.
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September results
According to Stats SA, the main positive contributors to the annual inflation rate are food products, beverages and tobacco, which increased by 3.8%. The main drag on the monthly rate came from coke, petroleum, chemical, rubber, and plastic products, which fell 0.6%.
Stats SA noted a strong increase in intermediate manufactured goods, which rose 7.6% year-on-year, up from 6.5% in August, while mining PPI jumped to 16% from 8.5% in the previous month.
By contrast, agriculture, forestry and fishing registered a decline of -1.1%, reversing the 3% annual rise seen in August.
PPI to edge higher
Johannes Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, said they expect producer price inflation to edge higher in the coming months.
“We expect producer price inflation to edge higher in the coming months, reaching around 4% by year-end, primarily due to the low base effects in the second half of 2024.
“Food will contribute to the uptick, with meat inflation easing slowly as supplies remain tight. However, the upside will likely be contained by the higher crop yields that were supported by favourable weather conditions.”
They noted that fuel prices, which have been in deflation for a year, are likely to start turning positive. In the short term, subdued global demand and excess supply will keep global oil prices low.
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PPI in 2026
They added that from 2026, PPI will gain upward momentum due to persistent structural constraints and other operational costs, including steep increases in electricity prices.
“Nersa approved a 12.7% tariff hike for 2025/26 and an 8% increase for the next two years, with the adjustments for the latter years higher than initially approved after it emerged that Nersa had miscalculated the cost recovery Eskom is entitled to by R54 billion.
“These sharp tariff hikes will filter through various categories, lifting headline producer inflation to more than 3% in 2026 and 2027.”
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