Johannesburg - Inflation in the manufacturing sector rose month-on-month in October to 4.2 percent against the 3.6 percent figure recorded in September, Statistics SA said on Thursday.
Producer Price Inflation is seen as a key driver of overall inflation, which is steadily creeping up and came in at 4.7 percent, from 4.6 percent, in October.
The South African Reserve Bank a week ago hiked interest rates because of inflationary pressures. The hike, of 0.25 percent, took the prime lending rate to 9.75 percent.
The bank’s latest forecast puts inflation at 4.6 percent in 2015, and 6 percent and 5.8 per cent in the next two years.
“The anticipated breach of the upper end of the target range in the first quarter of 2016 is now expected to average 6.4 percent, compared with 6.7 percent previously.
“The trajectory for the rest of the year is also slightly lower than previously forecast, with the temporary breach in the fourth quarter of 6.1 percent. The forecast for 2017 follows a slow downward trend, with inflation still expected to measure 5.7 percent in the final quarter.”
Stats SA says the main contributors to the annual rate of 4.2 percent were food products, beverages and tobacco products (6.2 percent year-on-year and contributing 2.1 percentage points), wood and paper products (7.6 percent year-on-year and contributing 0.8 of a percentage point) and metals, machinery, equipment and computing equipment (5.2 percent year-on-year and contributing 0.8 of a percentage point).
Investec chief economist Annabel Bishop says in a note that inflation has jumped to 4.2 percent year-on-year as milled grain prices rise with the effects of the drought meaningfully coming through.
She notes the lag between maize prices and consumer price inflation inflation means higher food price increases are in the pipeline, although retailers are limiting pass through as consumer affordability is weak.
When it comes to power hikes, Stats SA notes the annual change in PPI for electricity and water was 13.5 percent in October 2015, up from 11.3 percent in September.
Mining declined on an annual basis, while agriculture, forestry and fishing increased from 5.2 percent to 6.8 percent in October 2015.
IOL