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March producer inflation rises sharply
Producer inflation increased rapidly in March as the effects of higher fuel and food prices started to bite. The price producers pay at the factory gate leaped to 6.2 per cent in March from 4.7 per cent in February. This is much higher than economists had forecast and means consumers are at risk of paying more for goods and services. Jason Welz, Commodity and Materials Analyst at Afriforesight joins CNBC Africa for more.
Thu, 25 Apr 2019 10:47:33 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Producer inflation jumps to 6.2% in March from 4.7% in February, driven by higher fuel and food prices.
- Weakening Rand contributes to the rise in import prices, leading to higher producer prices.
- Outlook for consumer prices and producer inflation post-elections depends on the direction of the Rand.
Producer inflation surged in March as the effects of higher fuel and food prices began to impact the economy. The rapid increase in the price producers pay at the factory gate leaped to 6.2 per cent in March from 4.7 per cent in February, catching many analysts off guard. The unexpected jump in producer prices could lead to higher costs for consumers in the near future, as the pressure on consumer price inflation is likely to continue in April and possibly May.
The weakening Rand played a significant role in the rise of import prices, which in turn contributed to the increase in producer prices. The higher oil prices also had a notable impact, leading to significant increases in petrol and diesel prices. Petrol prices rose by 8% year on year and 5.9% from the previous month, while diesel prices saw an even greater increase of 7.1% from February. Food prices, although not as pronounced, still rose by 4.9% compared to last year and 0.9% from February, making it a contributing factor to the overall surge in producer inflation.
On the mining side, there were substantial increases in prices, driven mainly by key export minerals whose prices rose across the board in March. However, coal prices acted as a limiting factor, preventing an even larger increase in mining-related inflation.
Looking ahead, the outlook for producer inflation will depend largely on the direction of the Rand post-elections. While there may be a slight weakening leading up to the elections as investor confidence wavers, a strengthening Rand post-elections could help alleviate some of the pressure on consumer prices. Despite the potential benefits to the mining industry from a weak Rand, consumers are likely to face rising prices due to the currency depreciation.
The surprising surge in producer inflation in March, although unexpected, may not change the overall outlook for the year significantly. If this trend continues and more surprises follow, it could have a more significant impact on the economy. However, for now, it is not a major cause for concern.
In conclusion, the rise in producer inflation in March highlights the challenges facing the economy, particularly in terms of consumer price inflation. While some factors like a weak Rand may benefit certain industries, the overall impact on consumers could be higher costs for goods and services in the coming months.
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