Producer Inflation Cools to 2.2% as Fuel and Food Prices Ease

South Africa’s producer price inflation slowed more sharply than expected in January, providing some relief for businesses and consumers alike.

According to Stats SA, the annual producer price index (PPI) came in at 2.2% in January, down from 2.9% in December 2025. On a month-on-month basis, the index decreased by 0.2% .

What Drove the Decline?

The main negative contributor to the monthly rate was the coke, petroleum, chemical, rubber and plastic products category, which fell by 2.3% and contributed -0.5 of a percentage point.

Investec Economist Lara Hodes explained the dynamics: “Specifically, the petrol price fell by -66c/litre in January, while the diesel price decreased by -R1.37/litre aiding inflation lower during the month.”

She noted that further cuts in both petrol and diesel prices were announced in February, though a pick-up in the global oil price to over $70/bbl could see hikes reinstated in March.

Food Prices

Manufactured food price inflation eased notably to 0.8% year-on-year from 1.7% in December.

Hodes attributed this to international agricultural commodity price movements, which affect local prices through export/import parity. Global food prices fell by 2.1% month-on-month in January, while the rand strengthened by 3.4% against the US dollar.

The contribution from the food products, beverages and tobacco products categorywhich makes up 29.2% of the PPI basketwas accordingly -0.1% for the month.

However, Hodes noted that meat and meat products inflation, while easing from 14.8% year-on-year, remains somewhat elevated at 12.5% . The domestic cattle industry continues to grapple with foot-and-mouth disease, though widespread vaccination remains a priority.

By the end of March, over five million vaccines will have entered the country from three international suppliers, the Department of Agriculture has noted. Locally, the ARC has committed to producing 20,000 vaccines per week, scaling up to 200,000 per week in 2027.

Positive Contributors

Not everything was down. The main positive contributors to the annual headline rate were:

• Food products, beverages and tobacco products (2.4%, contributing 0.7 percentage points)

• Furniture and other manufacturing (12.2%, contributing 0.5 percentage points)

Other Sectors

• Intermediate manufactured goods: Annual inflation ticked up slightly to 10.5% from 10.1% in December.

• Electricity and water: Annual inflation was 16.7% , down marginally from 16.9% in December.

• Mining: Annual inflation surged to 28.4% from 25.7% in December, driven by non-ferrous metal ores (51.3%) and gold (23.9%).

Analyst Views

The Nedbank Group Economic Unit said the outcome was lower than their and the market’s expectations.

“The numbers are based on reweighted components of inflation. The downward pressure emanated mainly from a drop in fuel prices and a moderation in food inflation. These outweighed the acceleration in prices of metals, machinery and equipment.”

Nedbank expects PPI to rise moderately in the coming months, reflecting a normalisation off last year’s low base and higher food and fuel prices. However, “muted PPI against a backdrop of patchy domestic demand and excess capacity in some industries implies that the pass-through to consumer inflation should remain limited in the short term.”

The Bottom Line

At 2.2% , producer inflation is cooling faster than expected. For consumers, that could mean less pressure on retail prices down the line. For businesses, it offers some breathing room.

But with mining inflation surging, oil prices volatile, and foot-and-mouth disease still affecting meat prices, the path ahead is not without risks. For now, though, January’s numbers are welcome news.