PRODUCER inflation accelerated to 4.8% year on year in December, from 4.3% in November, amid rising food and machinery prices, Statistics SA data showed on Thursday.

The producer price index (PPI) for final manufactured goods averaged 3.6% last year compared with a 7.5% average in 2014. On the month, PPI increased by 0.2%.

Rising inflation is going to encourage more interest rate increases this year, economists say.

Food prices are rising as a drought has caused production shortages and necessitated imports, which are more expensive due to a weak rand.

Machines, metals and other equipment SA needs to manufacture goods have also become more expensive to import due to the weak rand.

Stats SA said that the main contributors to the annual PPI rate of 4.8% were food products, beverages and tobacco products, which contributed 2.1 percentage points; wood and paper products, which contributed 0.8 of a percentage point; and metals, machinery, equipment and computing equipment, which contributed 0.7 of a percentage point.

Stats SA also produces four other PPIs: for intermediate manufactured goods; electricity and water; mining; and agriculture, forestry and fishing.

The annual intermediate manufactured goods inflation slowed to 1.6% from 1.9% in November.

The annual electricity and water inflation accelerated to 14.1% in December compared with 12.9% in November.

Water and electricity tariffs rose sharply last year and are still expected to rise this year.

The annual percentage change in the PPI for mining was -0.7% in December compared with 2.4% in November. The main contributor to the annual rate of -0.7% was non-ferrous metal ores.

The annual percentage change in the PPI for agriculture, forestry and fishing was 11.8% compared with 9.6% in November on rising agricultural product prices due to the drought.