Picture: THINKSTOCK
Picture: THINKSTOCK

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PRODUCER inflation is sharply higher year on year in October at 4.2% after a 3.6% year-on-year increase in September.

Consensus was for a 3.8% increase.

The 4.2% was the strongest pace of acceleration since December last year and reflected rising food prices mainly due to a drought, Statistics SA data showed on Thursday.

On a monthly basis, the producer price index (PPI) for finished manufactured goods increased 0.9% from September to October.

Food products, beverages and tobacco products; wood and paper products; and metals, machinery, equipment and computing equipment were the main contributors to the annual rate of 4.2%.

A weak rand makes food and metal imports more expensive.

BNP Paribas Securities economist Jeff Schultz said that crop prices were increasing due to the severe drought the country was experiencing. Local crop imports were currently up more than 70% year on year, he said.

"This, coupled with a weaker rand, is likely to show up more meaningfully in broader food price pressures into year-end and is likely to add to the Reserve Bank’s headaches on inflation in 2016," Mr Schultz said.

Yellow maize prices hit a record high of R3,210 a metric ton in November, Barclays economists said.

Stats SA also tracks the PPIs for intermediate manufactured goods; electricity and water; mining; and agriculture, forestry and fishing.

The PPI for intermediate manufactured goods was up slightly on an annual basis on higher costs of wood and textiles and leather goods.

The PPI for electricity and water was also higher year on year in October. Power utility Eskom has raised electricity tariffs almost 12.7% this year while municipalities have also raised water tariffs.

The PPI for mining decreased by 0.8% year on year in October compared with decrease of 5.2% year on year in September. The main contributor to the annual rate of -0.8% was nonferrous metal ores. Commodity prices continue to be weak with institutions such as the International Monetary Fund forecasting a very slow recovery.

The PPI for agriculture, forestry and fishing was 6.8% year on year in October compared with 5.2% year on year in September. The sector has been hit hard by a drought, which has led to production shortages and price increases.