Producer price inflation remained subdued in June as the country continues to feel the effects of the coronavirus and the associated lockdown on economic activity.

The producer price index (PPI), which measures inflation at the factory gate, rose 0.5% year on year in June, from 0.4% in May and 1.2% in April. A look at last year’s figures gives a good indication of just how things have slowed during the Covid-19 pandemic, with annual PPI for April, May and June 2019 coming in at 6.2%, 6.5% and 6.4%, respectively.

Nedbank’s economic unit believes that PPI and consumer inflation “have probably troughed”, with the latter coming in at 2.2% in June from 2.1% in May, data released on Wednesday showed.

“From this point prices should continue to rise but remain muted. This benign price outlook (especially on the consumer inflation end) as well as poor growth prospects suggest there is room for further monetary easing by the Reserve Bank.”

Nedbank added, however, that due to the split in votes at the last monetary policy committee meeting, when rate cuts in 2020 were brought to a total of 300 basis points, its view is for rates to be kept on hold for now.

The main contributors to the annual PPI rate were food, beverages and tobacco products, and transport equipment. They rose 3.2% and 7.9%, respectively.

Investec economist Lara Hodes believes food price inflation will remain “well contained in the near term”, with the country’s grain production having risen in recent months. Another good season is expected because of higher rainfall.

Measured on a month-on-month basis, PPI increased 0.5% in June, with coke, petroleum, chemical, rubber and plastic products being the main contributors, increasing by 2.5%. The month-on-month increase in May was 0.3%.