Johannesburg, 30 January 2020 – The decrease in the selling price inflation will have the effect of preventing companies  in the Metals and Engineering (M&E) sector from improving margins, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said this morning.

The latest producer price index (PPI) data published by Statistics South Africa (Stats SA) today indicates that the annual percentage change in the PPI for intermediate manufactured goods decreased from -1.1 percent in November 2019 to -1.5 percent in December 2019. This  is inconsistent with the annual change in the PPI for final manufactured goods, which improved from 2.3 percent in November 2019 to 3.4 percent in December 2019.

Speaking after the release of the data, SEIFSA Economist Marique Kruger said businesses in the broader manufacturing sector in general and the M&E cluster of industries in particular still operate under increasingly difficult conditions. The situation, she said, is further exacerbated by low domestic demand and volatility in input costs,  underpinned by a volatile exchange rate.

“Given the tough conditions, the added pressure in the form of decreasing selling prices is discouraging as companies are unable to pass cost increases on to the market,” said Ms Kruger.

However, Ms Kruger said she  remains hopeful that the PPI for intermediate manufactured goods will rebound and provide a profitable buffer for businesses, since it is imperative to maintain a positive differential between the selling price inflation and input cost inflation to ensure that healthy margins are maintained.

SEIFSA is a National Federation representing 21 independent employer 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.