Bernice J. Hicks 
The data, released Thursday by Statistics South Africa (Stats SA), clearly underscores the inflationary vice that has the South African economy – and for that matter the global economy – firmly in its grip. As a result, consumers will pay even higher prices for a range of products.
At 16.2% year-on-year, the domestic PPI is now at its highest level since August 2008, when it hit 19.1%. The CPI is at its highest level in 13 years, but at a more moderate level of 7.4%.
The South African Reserve Bank will take this data as further evidence that its 75 basis point rate hike last week – which took the cumulative rate hike since November last year to 200 basis points and the prime rate at 9% – was not excessive. Critics would counter that inflation is being stoked by external factors, including Russia’s invasion of Ukraine, and that higher rates will do little to contain price pressures while suppressing demand. interior already at half mast.
“The main contributors to the headline annual PPI inflation rate were coke, petroleum, chemicals, rubber and plastics, food, beverages and tobacco products, as well as metals, machinery, equipment and hardware,” said Stats SA.
The basket of coke and petroleum products saw producer inflation of 37.2% in the year to June, while food, beverages and tobacco cost more than 10% of more.
There may at least be some relief at the gas pumps in August. The Department of Minerals and Energy noted earlier this week that if the General Fuel Tax reduction ends on August 2, “there will still be a significant reduction in the prices of fuels, including paraffin, for South Africans. An official announcement in this regard will be made by the end of the week”.
Global crude prices fell around 10% in July, largely because the global economy is slowing and could well tip into recession, as the International Monetary Fund warned this week.
read in Daily Maverick: “IMF warns of global recession as inflation rises, South Africa unlikely to pull through”
Many economists remain of the view that South African inflation will peak this quarter. Time will tell if this is indeed the case. Either way, interest rates should continue to rise. In central bank parlance this is called “policy normalization”, which is surely ironic as there is little normal about the South African or global economy at the moment. DM/BM
