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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
March 6, 2026

Producer Price Inflation – January 2026

In January 2026, producer price inflation fell from 2.9% in December to 2.2% after minor revisions to producer price category weights. However, producer inflation fell by 0.2% month-on-month. Significant cost increases were noted in the following categories:

  • Food and Beverage Production: Increased by 2.2% and contributed 0.7 percentage point,
  • furniture and other manufacturing: Rose by 12.2% year-on-year while contributing 0.5 of a percentage point.

Production costs for intermediate goods rose by 10.5% in January, following a 10.1% increase in December. This indicates a clear inflationary trend that requires attention, as these increases exceed the South African Reserve Bank’s (SARB) new inflation target range of 2% to 4%. Annual growth is still significantly influenced by base effects from the 2024/25 data.

In the primary sector, mining costs climbed by 28.4% in January, following a 25.7% rise in December. In contrast, the agriculture sector experienced a further 5.8% decline, following a 5.0% decrease in December.

Overall, the trend in producer price inflation for final manufactured goods supports positive inflation expectations in South Africa for the short to medium term. Consumer inflation remains low at 3.5% for January, closely aligned with SARB’s target of 3%. While prices for certain intermediate goods—particularly water and electricity—exceed the target range, current figures suggest consumer inflation will likely remain low and stable in the near future.

This stability has allowed the Reserve Bank to lower interest rates at the November Monetary Policy Committee (MPC) meeting while keeping the rate unchanged during the January 2026 meeting, as both consumer and producer inflation expectations appear well-managed at this time. The Bank’s interest rate decision will consider both the Consumer Price Index (CPI) and Producer Price Index (PPI) when analysing inflation expectations for the first quarter of 2026.

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A Watershed Moment: Global Ceasefire and Massive Oil Correction Offer Crucial Relief for the SA Economy

A sudden global shift has delivered much-needed relief for South Africa. Following a Middle East ceasefire, oil prices have dropped sharply and the Rand has strengthened—easing pressure on fuel costs and inflation. While earlier price spikes still weigh on the outlook, this combined correction offers a critical window for economic stability, improved consumer confidence, and renewed growth momentum.

The Great Fuel Buffer

South Africa finds itself balancing global energy shocks with decisive local action. As rising oil prices threaten to strain consumers and key industries, government intervention has softened the immediate impact—highlighting both the urgency of the moment and the need for smarter, more resilient fiscal tools to manage future volatility.

SARB opts for Strategic Resilience

The South African Reserve Bank has opted for a “hawkish hold,” maintaining the repo rate at 6.75% despite headline inflation hitting a milestone low of 3.0%. Governor Lesetja Kganyago emphasised that while the inflation target has been met, the MPC remains wary of a potential “energy tax” on the economy, driven by global oil prices surging above $100 per barrel. Consequently, the Bank has adopted a cautious, forward-looking stance, slightly lowering the 2026 GDP growth forecast to 1.1% to account for these external shocks and ensure long-term currency stability.

Navigating the Geopolitical Crosswinds

South Africa faces renewed inflation risks despite brief market relief, driven by rising fuel costs and import dependence. The SARB is likely to hold interest rates to protect price stability.

The Perfect Storm:

This morning, South Africans received what should have been a crowning achievement for the South African Reserve Bank (SARB). Data from Stats SA revealed that the Consumer Price Index (CPI) cooled to 3.0% in February, down from 3.5% in January. This lands the country perfectly on the SARB’s new, more ambitious inflation target.