November PPI shows absence of price pressure

PPI for November shows the absence of price pressure at the factory gates as it remained unchanged from October.

According to Statistics SA, annual producer price inflation was -0.1% in November 2024, up from -0.7% in October 2024, while the producer price index (PPI) remained unchanged.

The main negative contributor to the headline PPI annual inflation rate was coke, petroleum, chemical, rubber and plastic products with -8.1% and contributing -2.0 percentage points.

The annual percentage change in the PPI for intermediate manufactured goods was 5.7% in November compared to 5.5% in October, with the index increasing by 0.4% month-on-month. The main contributors were basic and fabricated metals (2.9 percentage points) and chemicals, rubber and plastic products (2.1 percentage points).

The contributors to the monthly rate were basic and fabricated metals (0.3 of a percentage point) and sawmilling and wood (0.1 of a percentage point).

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PPI for electricity and water at 11.2%

The annual percentage change in the PPI for electricity and water was 11.2% in November, the same as in October as the index remained unchanged month-on-month. Electricity contributed 10.3 percentage points and water 0.9 of a percentage point to the annual rate.

The annual percentage change in the PPI for mining was -0.2% in November, compared to -4.8% in October, with the index increasing by 0.2% month-on-month. The main negative contributors to the annual rate were coal and gas (-1.3 percentage points) and non-ferrous metal ores (-0.6 of a percentage point).

The main contributor to the monthly rate was gold and other metal ores (0.8 of a percentage point).

The annual percentage change in the PPI for agriculture, forestry and fishing was 3.6% in November compared to -0.3% in October, with the index increasing by 3.3% month-on-month.

The main contributor to the annual rate was agriculture with 3.2 percentage points, while it was also the main contributor to the monthly rate with 3.4 percentage points.

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PPI expected to range around 4% in 2025

Johannes Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, say the recent inflation outcomes are encouraging. “However, we expect inflation to drift higher into 2025, lifted by food and fuel prices. “Food inflation will increase off a low base, further amplified by the impact of the earlier dry weather. Global disinflation will also slow down.

“However, improved domestic operating conditions due to stable electricity supply and further efficiency gains in logistics should help contain input costs and operating expenses, which together with the predictions of higher rainfall, will partly mitigate the upside.”

They say global oil prices will likely rise slightly as global demand improves and OPEC extends production cuts. The ongoing conflicts in the Middle East also still threaten oil prices.

Meanwhile, they point out that the stronger US dollar will likely weigh on the rand and other emerging market currencies. “The dollar will benefit from the expected change in US economic policies under Donald Trump’s administration, which could lead to sticky global inflation and raise the floor on interest rate cuts.

“On the domestic front, the threat of electricity tariffs and other administered prices rising more than expected and wages outpacing productivity could also exert pressure. We forecast PPI to average around 4% in 2025.”

Dr Elna Moolman, Standard Bank’s group head of South Africa macroeconomic research, says the PPI for November also signalled an absence of price pressure at the factory gate level and is still lower than a year earlier.