SA factory inflation rate drops to three-year low on lower fuel costs

South African producer inflation slowed for the 12th consecutive month in July, driven by lower gasoline 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 are regulated by the Central Energy Fund, fell 17.6% and 10.2% year-on-year respectively in August and should cool inflation further.