Producer price inflation continues to moderate
Producer price inflation slowed to 10.6% y/y in March from 12.2% y/y in February, partly due to base effects following a sharp increase last year. Monthly producer price pressure was 1.0%, reflecting an increase from 0.6% in the previous month. This was consistent with the monthly increase in fuel prices in March, but also reflected monthly pressures on manufactured food product prices. Excluding petroleum product prices, producer inflation was 9.8% y/y, reflecting a moderation from 10.6% in the prior two months.
Intermediate producer price inflation, a measure of product prices as they enter the production process, was steady at 5.0% y/y, unchanged from February, but reflected month pressure of 0.5%, after dropping by 0.7% m/m and 0.1% m/m in January and February, respectively. Last year's base effects, as well as easing supply chain pressures, should underpin subdued annual intermediate producer price inflation.
Fuel inflation was 4.5% m/m, reflecting the rise in both petrol and diesel prices in March. However, compared to March 2022, fuel inflation fell to 8.1% from 10.9% previously.
Year-to-date (January - March) producer inflation has averaged 11.8% y/y, higher than the 10.8% y/y average over the same period last year, with most categories reflecting a similar picture except in the coke, petroleum, chemical, rubber and plastic; metals, machinery, equipment and computing equipment; as well as furniture and other manufacturing price categories. Annual growth in key price categories was as follows:
Manufactured food products inflation was 11.7% y/y, reflecting a moderation from 13.7% y/y in February. The increase in food price categories was mixed, with meat and meat product prices rising by 6.1% y/y after rising by 5.9% y/y in February. Meanwhile, fish and fish product prices increased by 15.1% y/y, after increasing by 18.7% y/y in February; fruit and vegetable prices increased by 10.4% y/y, lower than the 11.4% y/y increase in February; and oil and fats prices only increased by 2.5% y/y, reflecting a significant moderation from 36.5% y/y in February. This was the first time since April 2020 that prices of oil and fats increased by a smaller single-digit margin. Between April 2020 and February 2023, oil and fat prices increased by an annual average of 31% y/y. Prices of dairy products increased by 17.1% y/y in March, reflecting an acceleration from 16.4% y/y in February. Grain mill products and animal feed prices are still increasing by over 20% y/y.
Petroleum-related product price inflation continues to moderate and has come down from a peak of 42.8% y/y in July 2022 to 12.2% y/y in March this year. Petrol inflation peaked at 61.9% y/y in July 2022 and was 6.4% y/y in March, while diesel price inflation peaked at 69.9% y/y in July 2022 and was 11.1% y/y in March.
Transport equipment prices increased faster by 14.5% y/y in March, from 10.5% y/y in February. This reflected an increase in producer prices of motor vehicles (13.2% y/y from 10.6% y/y in February) and parts for transport equipment (14.9% y/y from 10.6% y/y in February).
Outlook
Producer price inflation should continue moderating, partly assisted by base effects, as well as improving supply chain conditions and softening domestic demand. However, monthly price pressures may gain further momentum as the economy incurs the high cost of load-shedding and a slightly weaker domestic currency.
