South Africa’s Producer Price Index (PPI) rose to 16.4% year-on-year in May from 12.4% in April, Statistics SA said today. The rise comes as a major shock to many. Most analysts were expecting the figure to come in at 12.4%. Statistics South Africa attributes a surge in the factory gate prices to changes to a new weighting structure, which includes iron ore and steel. After excluding these components, the PPI number came at 12.2%.

The double-digit rise in the steel price announced in May - which was approximately 18% across a range of steel products - by a leading steel producer was key to the larger-than-expected increase in the PPI in May. Rising world steel prices also did not help the situation. Basic iron and steel accounts for around 4.12% of the total index.

This surge in PPI adds pressure to the central bank as they are now more than likely to push interest rates up again. Analysts predict another 50 basis point hike in August.

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