PPI data point to margin pressure in the metals and engineering sector, says SEIFSA
PPI data point to margin pressure in the metals and engineering sector, says SEIFSA
Johannesburg, 27 June 2017 – The Producer Price Inflation (PPI) data released by Statistics South Africa (StatsSA) today indicate significant margin pressure for companies in the metals and engineering sector, with a negative deferential recorded between input cost and selling price inflation, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said.
SEIFSA Junior Economist Roberta Noise said the PPI Index released by StatsSA for May 2017 showed a 4.8% annual change in final manufactured goods. This is up by 0.5% when compared to April 2017. She said that the annual increase was driven by food products, beverages and tobacco products with a 1.9 percentage point contribution, followed by coke, petroleum, chemical, rubber and plastic products contributing 1.6 percentage points.
Ms Noise noted that the intermediate manufactured goods changed to 3.1% in May 2017 from 5% in April 2017 on an annual basis. Contributors to the annual change include chemicals, rubber and plastics (1.6 percentage points) as well as sawmilling and wood (1.3 percentage points). The most significant contributor to the monthly 0.3% change was coke, petroleum, chemical, plastics and rubber products, with a 0.4 percentage point contribution.
Ms Noise said that SEIFSA’s input composite cost index showed a 11.4% increase for May 2017. The growth in input cost inflation relative to the growth in selling price inflation reflected in the PPI Final Manufactured and Intermediate Manufactured continues to record a significant negative deferential gap between input costs and final selling price inflation.
“The fact that the difference between input cost and selling prices is not narrowing draws one to the logical conclusion that producers are carrying this cost differential in the market, putting their margins under severe pressure,” Ms Noise added.
The Intermediate manufactured goods for the Production Price Index, which represents prices of products in the metals and engineering sector more extensively, is growing slower than what the industry is experiencing relative to input costs.
“The picture remains gloomy for the industry, with downward price rigidity at the forefront,” Ms Noise concluded.
Rising unemployment shows an economy in trouble, says SEIFSA
Johannesburg, 27 June 2017 – The employment figures released by Statistics South Africa (StatsSA) today indicate a deeply troubled economy which, in the absence of a solution, will see ordinary South Africans continuing to suffer badly, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said.
SEIFSA Senior Economist Tafadzwa Chibanguza said that given the 2017 first-quarter Gross Domestic Product (GDP) figures recently published, which revealed that South Africa had fallen into a recession, it almost seemed a forgone conclusion that the employment figures for the same period would confirm a negative picture.
“In fact, the employment figures mirror those of the GDP, with the tertiary services contributing the most to the employment declines,” Mr Chibanguza added.
The quarterly employment statistics released by StatsSA showed that a total of 48 000 jobs were lost between the fourth quarter of 2016 and the first quarter of 2017, amounting to a 0.5% decrease. Between the first quarter of 2016 and the first quarter of this year, a total of 58 000 jobs – representing 0,6% of jobs – were shed.
The 48 000 jobs lost in Q1 2017 is a net number, which is the result of decreases in most sectors and increases in some. Chibanguza said if all the jobs lost in the tertiary sector were added up, then a total of 64 000 jobs were lost between the end of Q4 2016 and Q1 2017. If the 4000 jobs lost in the manufacturing sector were added, then a total of 68 000 jobs were lost in Q1 2017.
Mr Chibanguza said that, with employment being an outcome variable which increases or decreases on the back of higher or lower levels of economic activity, South Africa “a thorough introspection of its challenges in order for meaningful solutions to be found”.
He said that it was encouraging to note that the mining sector had added 8000 jobs and the construction sector 12 000 jobs in Q1:2017. He said that the increase in mining jobs was to be expected given the relatively better mining production statistics released for the first quarter of 2017, which was assisted by stronger commodity prices.
However, Mr Chibanguza cautioned that the new version of the Mining Charter released by the Minister of Mineral Resources last week had the potential to undo this upside.
He added that construction employment generally tended to be volatile, depending on the number of projects in progress, and sounded a caution that the current weak levels of business confidence and the accompanying slow gross fixed capital formation were likely to imperil this trend.
“Rome is burning and the man on the street is the biggest victim”, Mr Chibanguza warned.
Ends
Issued by:
Nuraan Alli
Sales Manager
Tel: (011) 298- 9436
Email: nuraan@seifsa.co.za
Web: www.seifsa.co.za