Johannesburg, 31 January 2019 –  The latest data for the Producer Price Index (PPI) for intermediate manufactured goods is disappointing, indicating a further deterioration in selling price inflation in the Metals and Engineering (M&E) cluster of industries for December 2018, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Economist Marique Kruger said today.

The data, released by Statistics South Africa today, shows a slowdown in both the PPI for final manufactured goods and the PPI for intermediate manufactured goods from 6.8 percent in November 2018 to 5.2 percent in December 2018 and from 6.0 percent in November 2018 to 5.0 percent in December 2018, respectively.

Ms Kruger said the declining trend in PPI for intermediate manufactured goods is generally of concern to producers in the M&E cluster of industries since this PPI measures selling price inflation.

“Although declining prices are beneficial to those who buy the M&E sector’s products, the same cannot be said of businesses in the sector, which are struggling to improve on declining operational surpluses and profit margins,” Ms Kruger said.

Moreover, Ms Kruger said the decrease in the PPI for intermediate manufactured goods has the potential of reducing the existing positive differential between input cost inflation and selling price inflation.

She said it was necessary to maintain a positive differential between the selling price inflation and input cost inflation not only to sustain current businesses, but to also assist in creating new businesses in the medium to long term.

SEIFSA is a National Federation representing 23 independent employers Associations in the metals and engineering industries, with a combined membership of 1600 companies employing around 200 000 employees. The Federation was formed in 1943 and its member companies range from giant steel-making corporations to micro-enterprises employing fewer than 50 people