Johannesburg - Increases in prices at South Africa's mines, factories and farms slowed to 6.8% year-on-year (y/y) in September from 7.8% in August, official data showed on Thursday.
Statistics South Africa said on a monthly basis the Producer Price Index (PPI) was at -4.1% compared with 0.4% in August.
Analysts said the lower inflation in producer prices, together with a slowdown in consumer price increases, bolstered chances of another interest rate cut in November.
The PPI was lower than forecast. A Reuters poll last week showed PPI was expected to quicken to 8.0% y/y and was seen at a negative 2.9% on a month-on-month basis.
Monale Ratsoma, economist at Thebe Securities, said PPI at 6.8% "reflects the benign inflation environment in the near term".
"This supports our call for a 50 basis-point cut in interest rates next month, bearing in mind that the latest consumer inflation continued to surprise on the downside."
KADD Capital economist Elize Kruger said the lower increase "could be a supporting factor for a rate cut in November".
Exported commodities inflation quickened to 7.6% y/y in September from 7.2% the previous month, while imported commodities inflation was at 0.7% y/y from 2.1 %
Investec economist Annabel Bishop said the better-than-expected PPI figure was likely due to a larger-than-expected drop in electricity prices as winter came to an end.
"In addition, rand strength will have influenced the outcome of producer prices. Base effects would have pushed the PPI outcome higher were it not for rand strength," she said.
"We continue to expect that the South African Reserve Bank will cut interest rates by 50 basis points in November, but call for a 1% cut instead to kickstart growth and reduce the interest rate differential driving rand strength."
Mike Schüssler, economist at Economists.co.za, said the PPI was lower than expected and "strengthened the basis for an interest rate cut".
The rand was little changed at R7.0308/$ after the data's release.
Consumer inflation slowed more than expected to a five-year low of 3.2% y/y in September, data showed on Wednesday, amplifying calls for another interest rate cut next month as prices continue surprising on the downside.
In his mid-term budget speech on Wednesday, Finance Minister Pravin Gordhan said inflation was expected to remain below 6% over the next three years, supported by a moderation in food price trends and a relatively buoyant exchange rate.