South Africa factory inflation drops to three-year low

South African producer inflation slowed for the 12th consecutive month in July, driven by lower petrol and other fuel prices. 

The annual rate dropped to 2.7% — the lowest level since October 2020 — from 4.8% in June, according to data published Thursday by Pretoria-based Statistics South Africa. The median forecast of the eight economists surveyed by Bloomberg was 3%.

The reading provides a further indication that slower inflation is taking root after data last week showed price growth eased to a two-year low of 4.7%.

The measure is still above the 4.5% midpoint of the central bank’s target range at which it prefers to anchor price-growth expectations.

The slowdown in producer inflation, an early indicator of consumer-price growth, was mostly driven by prices of coke, petroleum, chemicals, rubber and plastic products, which contributed a negative 2.5 percentage points to the annual rate.

South Africa’s diesel and petrol prices, which the Central Energy Fund regulates, fell 17.6% and 10.2% year-on-year, respectively in August and should cool inflation further.