South African consumers are set to feel further financial strain as producer price inflation (PPI) unexpectedly rose to 2.1% in August, signaling higher costs for goods down the pipeline. Economists warn that the real pressure will hit in 2026 when steep electricity price hikes fully filter through the economy.
The August increase, driven largely by a jump in food prices—particularly meat, which remains elevated at 18.5% due to the foot-and-mouth disease outbreak—exceeded market expectations. While lower global fuel prices provided some relief, this is seen as temporary.
According to Nedbank’s economic unit, PPI is expected to climb to around 4% by the end of 2025. However, the major concern lies further ahead. Recent electricity tariff hikes approved by NERSA—a 12.7% increase for 2025/26 followed by 8% for the next two years—will begin to bite deeply in 2026.
This means a double blow for households: directly from higher Eskom and municipal bills, and indirectly through increased prices for almost all goods and services as businesses pass on their rising operational costs. Nedbank forecasts producer inflation will exceed 3% in 2026 and 2027, fueled by these persistent structural constraints.
Additional risks, such as rand volatility and potential oil price shocks from geopolitical conflicts, could push inflation even higher, painting a challenging outlook for the cost of living in the medium term.
About The Author
