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Prices rise amid food inflation warnings

| Economic factors

The cost of producing goods continued to rise in March — but at a slower pace — compared with a year ago, offering a respite economists warn is temporary.

Economists say unprocessed food prices will continue to rise as the effects of a severe drought become more apparent.

The producer price index (PPI) for manufactured goods, considered headline producer inflation, slowed to 7.1% year on year in March from 8.1% in February, Statistics SA data showed on Thursday. Producer prices were up 0.7% month on month. Higher food, metals and transport equipment costs kept producer prices elevated in March compared with a year ago, the data showed.

Despite the temporary respite, higher food prices could push PPI inflation towards 10% this year, says Investec chief economist Annabel Bishop.

The latest producer inflation data are in line with the price index component of the Barclays purchasing managers’ index (PMI) — which measures activity in the manufacturing sector — released early this month.

The price index of the PMI remained high but fell slightly to 87.8 in March on a drop in the petrol price and a slightly firmer rand, indicating some price relief for producers.

Stats SA also released four other producer inflation data — for agriculture, forestry and fishing; intermediate manufactured goods; electricity and water; and mining — to indicate the kind of price pressures faced by producers.

The annual PPI percentage change for agriculture, forestry and fishing slowed slightly, but remained high at 20.9% in March compared with that of 24.9% in February this year.

Agricultural products have been rising after a severe drought caused production shortages and necessitated costly imports.

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