South Africa PPI (m/m) Jan: -0.2% (est 0.0%; prev 0.2%)

South Africa PPI (m/m) Jan: -0.2% (est 0.0%; prev 0.2%)

South Africa’s Producer Price Index Contracts in January, Reflecting Persistent Deflationary Pressures

South Africa’s producer price index (PPI) fell by 0.2% month-on-month in January 2026, below the estimated 0.0% and following a 0.2% increase in December. This marks a continuation of deflationary trends observed in late 2024, when PPI contracted by 0.7% year-on-year in October, driven by declining fuel costs and a stronger rand.

The latest decline underscores subdued inflationary pressures at the production stage, influenced by lower global crude oil prices and favorable exchange rate movements. Brent crude prices dropped 24.6% year-on-year in October 2024, while the rand appreciated by 5.8%, reducing local petrol and diesel prices by 22.2% and 26.9%, respectively. These factors have alleviated cost burdens for energy-intensive industries, though other sectors show mixed trends. For instance, chemical products moderated, while rubber and plastic prices accelerated to 7.6% year-on-year in October.

Sector-specific data reveals divergent dynamics. Inflation for metals, machinery, and equipment eased to 3.1% in October 2024, while food, beverage, and tobacco inflation softened to 3.6% as declines in meat, dairy, and vegetable prices offset gains in grain products. Meanwhile, electricity and water PPI rose to 11.2% year-on-year in October, reflecting ongoing energy price hikes.

Economists at Nedbank's Economic Unit note that while base effects and lower fuel prices will temper producer inflation in early 2025, risks remain. Geopolitical tensions, such as Israel-Hamas conflicts, could disrupt oil markets, while domestic structural inefficiencies persist as upside risks. They forecast annual PPI to average 3.3% in 2024, with a year-end projection of 2.4%.

The moderation in PPI aligns with broader disinflationary trends, as the consumer price index (CPI) fell to 5.1% in June 2024, remaining within the South African Reserve Bank's target range. However, administered price pressures—particularly in electricity and fuel—remain a concern for policymakers.

Overall, January's PPI contraction signals continued easing of production-side inflation, though uncertainties in global energy markets and domestic supply constraints could influence future trajectories.