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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
June 25, 2026

Producer Price Inflation – May 2026

In May 2026, producer price inflation surged to 7.8%, driven by significant fuel price shocks that impacted goods leaving the factory gate. Important sectors saw remarkable price hikes, with Coke, petroleum, and chemical products alone rising by 22%. Meanwhile, mining costs soared by 28.1%, heightening concerns about ongoing inflationary pressures. With consumer inflation climbing to 4.5%, surpassing the South African Reserve Bank’s target of 2% to 4%, the economic landscape is becoming increasingly unstable. Readers will find critical insights into how these trends affect overall inflation expectations and the imminent interest rate decisions that could shape South Africa’s economic future. Dive into the full report for a comprehensive analysis of these pivotal issues and their implications.

In May 2026, producer price inflation increased from 4.8% in April to 7.8% after the fuel price shocks trickled through the economy into the prices of goods leaving the factory gate. However, producer inflation increased by 2.6% compared to the 3.0% the previous months, a slightly slower rate than in April 2026. Significant cost increases were noted in the following categories:

  • Coke, petroleum, chemical, rubber and plastic products: Increased by 22.0% and contributed 4.7 percentage points,
  • Paper and printed products: Increased by 8.7% and contributed 0.7 percentage points,
  • Food and Beverage Production: Increased by 2.1% and contributed 0.6 percentage points,
  • Metals, machinery, equipment and computing equipment: Rose by 2.9% year-on-year while contributing 0.5 of a percentage point.

Production costs for intermediate goods rose by 13.7% in May, following a 10.0% increase in April. This indicates a clear inflationary trend that requires attention, as these increases 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 28.1% in May, following a 24.9% rise in April. In contrast, the agriculture sector experienced a further 5.4% decline, following a 6.5% decrease in April.

Overall, the trend in producer price inflation for final manufactured goods does not bode well for general consumer inflation and inflation expectations in South Africa for the short to medium term. Consumer inflation now exceeds the upper band of the new target range, at 4.5% in May. 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’s coming interest rate decision will consider both the Consumer Price Index (CPI) and Producer Price Index (PPI) when analysing inflation expectations going forward, as price stability remains the key concern for the Bank as it relates to interest rate decisions for South Africa.

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