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Annual producer inflation accelerated sharply for the second month in a row, soaring to 7.8% year on year in May from 4.8% in April. This suggests the central bank might be forced to hike interest rates further at its next policy meeting in July.The main reason for the surge was coke, petroleum, chemical, rubber and plastic products, which jumped to an annual rate of 22% and contributed 4.7 percentage points to the headline number, Stats SA said on Thursday.Annual inflation for paper and printed products was 8.7%, while for food products, beverages and tobacco products it reached 2.1%.(Karen Moolman) Month on month, prices at the factory gate increased 2.6% in May, driven largely by coke, petroleum, chemical, rubber and plastic products.Producer inflation measures price changes at the factory or wholesale level — factoring in the costs of raw materials, electricity, fuel and imported inputs — before goods reach consumers. It is an early warning signal for consumer inflation, which is targeted by the South African Reserve Bank (Sarb) for monetary policy. The Bank adopted a lower 3% target last year.The May producer inflation print is a reality check for those who might have been hoping the Sarb might hold off hiking interest rates further next month after consumer inflation undershot expectations at 4.5% year on year in May. However, it breached the top of the 2%-4% tolerance band of its target.Both producer and consumer inflation have trended higher in response to steep fuel price increases since early April as the Middle East war has played havoc with global oil supply. South Africa is a net importer of both oil and petroleum products.The Reserve Bank raised its benchmark rate by 25 basis points to 7% in May, citing a deterioration in the inflation outlook.The producer price index measures changes in the prices of locally produced commodities. Stats SA surveys a sample of producers each month to compile the indices for final manufactured goods — the headline number — as well as intermediate manufactured goods, electricity and water, mining and agriculture, forestry and fishing.Thursday’s data showed that the annual change in the producer price index (PPI) for intermediate manufactured goods was 13.7% in May compared with 10% in April, while on a monthly basis the index rose 2.4%.Electricity and water inflation eased slightly to 12.3% in May from 12.5% in April, while the PPI for agriculture, forestry and fishing fell 5.4% year on year in May after dropping 6.5% in April.
