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Producer inflation jumps higher as food prices rise

by , 26 November 2015

Earlier today, Stats SA released its producer inflation data for October. The data showed that the rise was mostly due to climbing food prices.

This data could indicate that a jump higher in consumer inflation could be on the cards.

Let's take a closer look at what the data revealed…

Producer inflation rises to 4.2%

Producer inflation, as measured by the producer price index, rose to 4.2% last month, reports Fin24. This was mostly down to higher prices “for food, alcohol and tobacco products”.
That’s a rise of 0.6% from September’s reported producer inflation, adds Fin24.
The figure was much higher than economists expected, notes BDLive. The “consensus was for a 3.8% increase”.
Looking at the data month to month, prices rose 0.9% between September and October, says MoneyWeb. That’s much higher than the 0.3% rise between August and September.
Worries about inflation spiralling higher led the South African Reserve Bank to raise rates 0.25% last week, says IOL. The bank then lowered its forecast for inflation in the first quarter to 6.4% from 6.7%.

The Reserve Bank has concerns about rising inflation

The central bank expects inflation to remain high over the next couple of years, adds IOL. For 2016, it forecasts an average of 6% and 5.8% for 2017.
Today’s data shows the quickest rise in producer inflation since December 2014, says BDLive. This is mostly down to “rising food prices”.
The prices of food, beverage and tobacco products rose 6.2% adding 2.1% to the rise in producer inflation, says Fin24. A drought hitting South Africa is having a severe impact on crops and prices, with the weak rand putting additional pressure on the price of imports.
With such a leap in producer inflation over the past month, it may indicate what could lie ahead for consumer inflation. We will have to wait until next month to see how quickly these producer price rises are impacting consumer inflation.
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Producer inflation jumps higher as food prices rise
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