Producer Price Inflation

While deflation persists in several categories, significant annual decline was recorded in product category coke, petroleum, chemicals, rubber, and plastics— falling by 6.4%, compared to a 5.5% decrease in April. Transport equipment prices decreased by 0.4%, petrol by 4.6%, and parts for transport equipment by 0.4%.

Production costs for intermediate goods increased by 6.9% in May, following an 8.5% rise in April. Although this exceeds the South African Reserve Bank’s (SARB) inflation target range of 3% to 6%, the month-on-month increase was relatively modest at 0.9%. The annual rise was primarily driven by base effects from 2024 data.

Key contributors to the annual increase included:

• Basic and fabricated metals, which rose by 12.3%, adding 6.1 percentage points.
• Chemicals, rubber, and plastic products, which increased by 1.4%, contributing 0.4 percentage points.

In the primary sector, mining costs grew by 2.8% in May, following a 4.1% increase in April. The agriculture sector experienced a 6.0% rise, up from 4.4% in April.

Overall, the trend in producer price inflation for final manufactured goods continues to support favourable inflation expectations in South Africa. Consumer inflation remains low at 2.8%, below the SARB’s target of 3%. Despite the rise in intermediate goods prices—particularly water and electricity, which are still above target—the current inflation figures suggest that consumer inflation will remain low and stable in the near term.

This stability may encourage the Reserve Bank to consider lowering interest rates in July 2025, as inflation expectations from both consumers and producers still appear to be well contained for now.