Producer Price Inflation Drops For Sixth Consecutive Month

29 November 2019 – Annual producer price inflation fell to 3% in October from 4.1% in September, the sixth consecutive month of declines in the index. 

The index, released by Statistic South Africa on Thursday, is a weighted index of prices that businesses charge at the wholesale or producer level for final manufactured goods.

The decline was in line with market expectations, according to Investec economist Lara Hodes.

“This is markedly below its recent peak of 6.5% y/y recorded in April 2019,” she said.  “The notable moderation in the headline result was chiefly supported by further pricing relief from the coke, petroleum, chemical, rubber and plastic products category, which makes up a sizeable 20.23% of the PPI basket”, she explained.

The Steel and Engineering Industries Federation of Southern Africa warned in a statement that the decline in PPI was a challenge for companies operating in the metals and engineering sector.

Seifsa economist Marique Kruger noted that producers are also facing cost pressures from imported inputs. “The mounting input costs pressure to businesses is disconcerting, especially given the current challenging economic environment characterised by weak domestic demand, increasing logistics and energy costs and declining employment numbers,” she said. As a result local companies have to review their individual costs curves to stay afloat.  The further dip in selling price inflation also “starves” businesses of an opportunity to enhance sustainability, she said. 

Month-on-month PPI for final manufactured goods, meanwhile, increased by 0.3%. Source (Fin24)