Cheaper fuel eases producer prices

Robert Laing

Robert Laing

Summer electricity prices and cheaper oil helped bring producer inflation down in October.

Vegetables at the farm gate got 11,2percent cheaper from September to October, according to Statistics South Africa.

This brought the annual deflation of average vegetable prices to 26,8percent.

But consumers are not seeing this on the grocery shelves.

While the producer price index for vegetables and other agricultural produce keeps coming down, the consumer price index keeps going up.

October's consumer price index showed vegetables increasing in price by 4,7percent from September.

Good news for farmers is that while fertilizer still tops the list with the highest annual inflation, prices dropped 1,6percent month on month.

Lower oil prices have not filtered through to downstream products yet.

Rubber showed the biggest month-on-month increase of eight percent, and plastic went up 2,8percent.

Standard Bank economist Danelee van Dyk said: "Encouragingly, the worst part of the inflation cycle is now behind us, as producer inflation has moved safely away from its peak of 19,1percent in August."

While lower prices are generally good news, Van Dyk said there was a risk that it would squeeze some factories into retrenching.

"Serious supply disruptions may occur if some producers, such as dairy farmers, can no longer operate profitably," she said.

Nedbank economist Carmen Altenkirch said: "Food prices at the agricultural level will ease further, due to a good summer harvest and lower international food prices.

"Over the coming months, this will feed through into prices at the manufacturing level."