ECONOMIC WEEK AHEAD | Lower fuel prices expected to drive sharp producer inflation slowdown

After consumer inflation eased in July , reflecting lower fuel prices, Stats SA’s producer price index data on Thursday is likely to show the same response to reduced costs at the factory gate during the month.

Producer inflation eased to 7.5% in June after spiking to 7.8% in May, driven mainly by coke, petroleum, chemical, rubber and plastic products.

Economists at Absa are expecting an even more pronounced slowdown to 5.8% in July, after the retail price of petrol fell by R2.01 a litre during the month, while the wholesale price of diesel dropped by R3.59, as hopes of a resolution to the US-Iran war drove global oil prices lower.

“Fuel prices have a relatively larger weighting in PPI [producer price index] than in the CPI basket, explaining the size of the move in the headline PPI inflation figure,” Absa said.

“Despite the cuts in July, fuel prices remain at much higher levels than prior to the conflict. Therefore, beyond the direct effects of fuel prices in PPI inflation, we will continue to closely monitor any signs of broadening in price pressures across the different parts and value chains of the manufacturing sector.”

To start off the week, Infrastructure South Africa, established in 2020 as the single point of entry for accelerated infrastructure investment, will on Monday and Tuesday host the fifth iteration of a sustainable infrastructure development symposium focusing on strengthening the government’s capacity to build future-ready, resilient and sustainable municipal infrastructure.

Read: Business confidence edges higher in July despite inflation and war risks

On Tuesday, the Reserve Bank will publish its three composite business cycle indicators for June, which it uses to establish whether a reference turning point has occurred in the business cycle.

In May, the leading business cycle indicator rose 4.2% year on year but decreased further by 0.3% month on month, with declines in five of the 10 available component time series outweighing advances in the other half.

Later on Tuesday, the Centre for Development and Enterprise, an independent policy analysis and advocacy organisation, will launch its Joburg’s Broken Budget report, the second of a series it is producing on the problems facing the metro.

It will show how years of unrealistic budgeting have helped drive Joburg into a chronic financial crisis. The city budgets for revenues it cannot collect, while failing to keep its costs in line with the cash actually coming in.

WATCH | What does SA’s latest inflation print mean for interest rates?

On Wednesday, the University of Johannesburg, in partnership with the Centre for African Minerals Value Chains and the Open Society Foundations, will convene a policy forum on critical minerals beneficiation in South Africa.

The discussion will focus on value addition and beneficiation; productive, technological and innovation capabilities; as well as institutional co-ordination and policy alignment and will bring together about 30 participants from government, industry, academia, civil society and relevant organisations in South Africa and other mineral-rich countries in the Global South.