The September Producer Price Index (PPI) reading is the latest sign that inflation in South Africa is receding from its July highs – a welcome development indeed.
The main PPI number slowed on a yearly basis in September to 16.3% from 16.6% in August.
Factory gate inflation hit a 14-year high in the year to July, so price pressures are easing.
Consumer inflation also slowed to 7.5% in September from 7.6% in August, after hitting a 13-year high of 7.8% in July.
But South Africa, with an unemployment rate of more than 33% and an economy likely to contract, remains caught in the stagflationary stranglehold of a cost of living crisis that is claiming most of the lives of the poor. and the working class.
“Coke, petroleum, chemical, rubber and plastic products were up 34.2% year-on-year,” Stats SA said.
Producer food inflation in September was 16.4%, accelerating from 15.4% in August. Consumer food inflation stood at 12.3% in September compared to 11.3% in August.
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This runs counter to global trends in food prices, which remain at worrying levels but are on a downward trend.
For example, the food price index compiled by the Food and Agriculture Organization of the United States fell in October for the sixth consecutive month in October.
The Reserve Bank of South Africa, which is expected to raise rates again next month in a move that will bring the prime rate back into double-digit territory, has ostensibly taken note of this in its recent statements. .
Ultimately, inflation continues to erode household incomes and the easing of price pressures is primarily a response to slowing global economic growth, which is hardly good news for the economy. dilapidated South Africa.
The rand/dollar exchange rate remains central to this drama.
The currency was boosted by Wednesday’s medium-term fiscal policy statement as its pledge to cut debt was welcomed by markets, although the task remains a daunting one in an economy with dismal growth prospects.
The rand fell from above 18.20/dollar to below 18 on Wednesday, but weakened again to above 18 on Thursday.
A stronger rand is needed to contain fuel and other import costs, and if it were to fall out of bed, the inflation picture would quickly darken.
Brent prices remain well below their 2022 highs at around $90 a barrel, but that is partly a response to poor global economic conditions.
South Africa is kind of caught in a losing inflationary situation at the moment. Inflation needs to moderate, but the reasons for that moderation generally bode ill for economic growth and job creation. DM/BM