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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
September 30, 2026

Producer Price Inflation – Aug 2026

South Africa’s producer price inflation eased to 5.0% year-on-year in August 2026, but persistent fuel and energy shocks continue to place pressure on the economy and keep inflation well above the South African Reserve Bank’s new 2%–4% target range. Although the pace of price increases has slowed, rising costs in petroleum, chemicals, metals, machinery, and intermediate goods, alongside elevated mining costs, suggest that inflationary pressures are still filtering through to businesses and consumers. With consumer inflation at 4.4% and the Reserve Bank having raised interest rates by 25 basis points, this report examines what the latest PPI trends mean for South Africa’s inflation outlook, interest-rate decisions, and the cost pressures likely to shape the economy in the months ahead.

In August 2026, producer price inflation increased by 5.0% year-on-year, down from 5.7% in July, as fuel price shocks continued to trickle through the economy into the prices of goods leaving the factory gate. However, producer inflation decreased by 0.4% monthly during August, while the annual increase was mostly due to cost increases in the following categories:

  • Coke, petroleum, chemical, rubber and plastic products: Increased by 13.6% and contributed 2.9 percentage points,
  • Metals, machinery, equipment and computing equipment: Rose by 3.4% year-on-year while contributing 0.5 of a percentage point.

Production costs for intermediate goods rose by another 8.8% following the 9.8% in July 2026. This indicates that a clear inflationary trend is still ongoing, even though the pace of escalation continues to slow slightly. These increases still greatly exceed the South African Reserve Bank’s (SARB) new inflation target range of 2% to 4%. Annual growth is still significantly influenced by increases in fuel and energy prices resulting from the conflict in the Middle East and the subsequent closure of the Strait of Hormuz.

In the primary sector, mining costs climbed by 7.3% in August, following a 9.6% rise in July. In contrast, the agriculture sector experienced a further 1.8% decline, following a 4.5% decrease the previous month.

Overall, the trend in producer price inflation remains above the SARB’s upper target, albeit at a slower rate of escalation in producer prices for final manufactured goods, which does not bode well for general consumer inflation and inflation expectations in South Africa in the short- to medium-term. Consumer inflation still exceeds the upper band of the new target range, at 4.4% in August. While prices for certain intermediate goods, particularly water and electricity, continue to exceed the target range, current figures suggest consumer inflation will likely remain elevated in the short- to medium-term, as energy price shocks continue to reverberate throughout the economy.

The Reserve Bank has increased the interest rate by 25 basis points and will continue to analyse inflation expectations using both the Consumer Price Index (CPI) and the Producer Price Index (PPI), as price stability remains the key concern for the Bank in making interest rate decisions for South Africa.

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