JOHANNESBURG, 30 August 2018 – The continuous improvement in selling price inflation of companies in the metals and engineering (M&E) sector is encouraging, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Economist Marique Kruger said this morning.
The latest data published by Statistics South Africa (Stats SA) today indicates an increase in both the PPI for final manufactured goods and the PPI for intermediate manufactured goods from 5.9% in June 2018 to 6.1% in July 2018, and from 3.1% in June 2018 to 5.5% in July 2018, respectively.
“The underlying driver of volatility in PPI continues to be a weaker exchange rate which increased the costs of imported inputs of companies, thereby contributing to the selling price inflation. Ballooning input costs are a cause for concern, especially given the current challenging economic environment characterised by weak domestic demand and declining employment numbers,” said Ms Kruger.
She added that, as a resultan, manufacturers were finding it harder to continue to pass cost increases into the market in order to maintain a positive differential between input cost inflation and selling price inflation.
“However, the increasing trend in PPI for intermediate manufactured goods augurs well for producers in the M&E cluster, who have a lee-way to recover the losses incurred as a result of volatile input costs, enabling them to bolster their margins,” concluded Ms Kruger.
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