Economists expect that PPI will keep increasing as higher food prices will continue to lift producer inflation.
Producer price inflation is expected to edge higher in the coming months but remain subdued during the rest of the year before increasing in 2026 due to persistent structural constraints.
Statistics SA announced this morning that producer price inflation (PPI) accelerated from 1.5% in July to a one-year high of 2.1% in August. “The outcome was higher than our and the market’s forecast of 1.8%,” Johannes Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, say.
The food, beverages and tobacco products category remained the main driver, which alone contributed 1.3 percentage points to the headline PPI. Inflation for food, beverages and tobacco increased from 3.9% in July to 4.3% in August as food prices grew by 4.1%.
In the food category, the increase was mainly due to the prices of meat and meat products, which stayed elevated at 18.5%, reflecting the impact of the foot-and-mouth disease outbreak. Most other food categories also recorded price increases, with fruit and vegetable prices increasing from 4% to 4.9%, oils and fats from 0.7% to 1.7% and bakery products from 1.8% to 2.4%.
However, the price of grain mill products contracted for the third consecutive month, but the rate of decline moderated from -2.7% to -2.4%. Dairy product prices slowed from 1% to 0.7%.
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Deflation also plays a role in PPI
The deflation in coke, petroleum, chemicals, rubber and plastic products moderated slightly from 1.9% to 1% due to higher prices of chemical products, which increased from 2.8% to 3%. Deflation in petroleum products continued, driven by lower fuel prices on the back of lower global oil prices and a firm rand. The rate of decline in the price of petrol deepened to -7.8% from 7%, but diesel slowed from -7% to -2.8%.
Metals, machinery and equipment prices increased from 0.1% to 1.1%, lifted by higher ‘structural and fabricated metal products’ and ‘general and special purpose machinery’, which outweighed further price decreases in household appliances and office machinery.
According to Statistics SA, the PPI for intermediate manufactured goods increased slightly from 6.4% to 6.5%, with the upward pressure mainly coming from basic and fabricated metals, which increased by 13.3%, adding 6.7 percentage points.
Basic precious and non-ferrous metals prices also continued to rise by double digits (up 24.1%), while basic and other chemicals declined for the third consecutive month (down by 2.3%).
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Mining PPI increased to 8.5%
Mining inflation increased further from 7.5% to 8.5%, with the upward pressure coming from non-ferrous metal ores, which jumped by 12.9%, as well as ‘stone quarrying, clay and diamonds’, which increased by 31.8%, and ‘gold and other metal ores’, which increased by 16.9%.
In contrast, coal and gas prices decreased at a faster rate of 17.7% from -9.1%. PPI for electricity and water slowed from 4.9% to 4.6%, pulled down by electricity prices, which eased from 3.7% to 3.4%. Water prices remained elevated and steady at 11.6%.
PPI for agriculture, forestry and fishing fell from 6.5% to a five-month low of 3%. Khosa and Weimar say the drag mainly came from crops and horticulture (-5.2%) as the prices of cereals and other crops (-7.5%) and milk and eggs (-4%) fell. Prices of live animals increased by a further 18.8%.
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PPI outlook
Khosa and Weimar say they expect PPI to edge higher in the coming months, reaching around 4% by year-end, largely due to base effects. “The main upward pressure will stem from food, particularly meat prices, which remain elevated due to the lingering impact of foot-and-mouth disease.
“Still, the upside for food prices should be capped by higher field crop production supported by favourable weather. Fuel prices, which have been in deflation for a year, will also turn positive. However, in the short term, subdued global demand and excess supply should keep global oil prices low.
“On balance PPI will remain relatively subdued, averaging around 2% in 2025. From 2026 onwards, however, it will gain upward momentum due to persistent structural constraints and other operational costs, including steep electricity price hikes.”
Weimar and Khosa point out that Nersa approved a 12.7% tariff hike for 2025/26 and 8% for the next two years. “These will filter through various categories, lifting headline producer inflation to over 3% in 2026 and 2027.
“Additional risks stem from the rand’s volatility and geopolitical conflicts in the Middle East, which could reignite oil price shocks and worsen the broader inflation outlook over the medium to long term.”
