The Middle East conflict has caused a surge in the cost of manufactured goods, as higher fuel and fertiliser prices filter through the production business.
This threatens further financial strain on the consumer, as petrol and transport remain volatile, manufacturers facing higher costs for fuel, chemicals and other inputs may pass some costs to customers, and the increase in fertiliser may put pressure on the prices of crops and food products.
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Fuel and chemicals drive consumer inflation
Producer price inflation for final manufactured goods accelerated from 1.8% in February to 7.8% in May before moderating to 5.7% in July, according to the South African Reserve Bank’s Quarterly Bulletin.
The increase was largely driven by a sharp increase in the producer prices of coal and petroleum products, which moved from deflation of 8.9% in February to inflation of 38.8% in June.
Although producer inflation for coal and petroleum products subsequently moderated to 24.4% in July as domestic fuel prices dropped, the impact of the earlier price shock continued to be felt elsewhere in the production chain.
The report highlights that intermediate manufactured goods recorded producer price inflation of 9.8% in July while prices for chemicals, rubber and plastic products increased by 18.6%.
The reserve bank said the sharp increase in chemical prices was largely linked to the surge in fertiliser prices following the outbreak of the Middle East war. Prices of basic and other chemicals moved from deflation of 14.6% in February to inflation of 21.2% in July.
The pressure has also filtered through to consumers as headline consumer inflation accelerated from 3% in February to 5% in June before easing to 4.4% in August. The latest reading remained above the revised 3% inflation target.
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Oil price volatility keeps pressure alive
According to the SARB, the acceleration in consumer inflation was largely driven by the impact of the Middle East conflict on energy-related prices, alongside higher inflation in some service categories.
However, the stronger rand provided some relief by partly cushioning the impact of higher international crude oil prices on the South African economy.
“This reflected the sharp increase in international crude oil and refined petroleum product prices amid the ongoing war in the Middle East. The average monthly price of Brent crude oil increased from US$64.46 per barrel in January 2026 to US$103.90 per barrel in May – the highest monthly average since August 2022.
“Thereafter, the price of Brent crude oil declined to US$82.32 per barrel in July 2026 before increasing again to US$87.55 in August amid continued volatility in global oil markets,” reads the document in part.
Producer price inflation for agricultural, forestry and fishing products fell further into deflation, reaching 4.5% in July. Crop and horticultural product prices were 12.8% lower than a year earlier.
Producer inflation for live animals and animal products also slowed sharply, from 21.3% in January to 0.7% in July, as the high base created by elevated beef prices following the outbreak of foot-and-mouth disease a year earlier fell away.
Electricity and water prices also recorded slower producer inflation, with electricity and water inflation easing from 17.9% in March to 7.5% in July.
The central bank said this largely reflected the lower 2026/27 Eskom tariff adjustment and base effects.
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Businesses still face elevated input costs
The easing in some categories, however, has not completely erased the inflationary shock created by energy and input costs.
The central bank’s data shows that while the initial surge in producer inflation has begun to moderate, businesses in several parts of the economy are still facing significantly higher input costs than they were at the beginning of the year.
The risk for consumers may be that prolonged pressure on production costs could continue to filter through to the prices of goods and services, particularly if global fuel and fertiliser prices remain volatile.
The stronger rand has so far provided an important buffer against the international oil shock, but the SARB warned that the Middle East conflict had intensified global inflationary pressures as fuel price increases became more widespread.
- Producer price inflation for final manufactured goods in South Africa rose from 1.8% in February to 7.8% in May, then moderated to 5.7% in July, driven largely by coal and petroleum product price increases.
- The Middle East conflict caused fertiliser prices to surge, leading to a 21.2% inflation rate in basic and other chemical prices by July, up from deflation of 14.6% in February.
- Headline consumer inflation increased from 3% in February to 5% in June before easing to 4.4% in August, remaining above the 3% target, mainly due to energy prices impacted by the Middle East conflict.
- Brent crude oil prices jumped from US$64.46 per barrel in January 2026 to a peak of US$103.90 in May, before fluctuating to US$82.32 in July and US$87.55 in August amid ongoing volatility.
- Despite easing inflation in some sectors, businesses continue to face high input costs, and prolonged pressure on production costs may further push consumer prices if global fuel and fertiliser prices remain volatile.
