Overall producer prices continue to rise indicating cost pressures at industrial production level, says SEIFSA

Overall Producer Prices Continue To Rise Indicating Cost Pressures At Industrial Production Level, Says SEIFSA

JOHANNESBURG, 27 MAY 2021 – The rise in producer price inflation (PPI) is indicative of the cost pressures manufacturers are currently facing as a result of rising input costs, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.

According to Statistics South Africa (StatsSA) data released today, PPI rose from a low level of 3.5% in January, reaching 6.7% in April for final manufactured goods. SEIFSA Chief Economist Chifipa Mhango said contributing factors to this increase include rising transport and energy costs as well as mining products which, from an industrial perspective, might not be financially sustainable in the long term. 

“The PPI data shows that manufacturers are passing these costs on to consumers, which is also why we see a rise in consumer price inflation, which rose to 4.4% in April,” he said.

Prices for intermediate manufactured goods also increased from a low base of 8.6% in January, reaching 11.4% in April. Mr Mhango said although this is positive news for producers of intermediate goods in the Metals and Engineering (M&E) sector in terms of potential revenue generation, in a depressed market this might negatively impact key consumer market affordability, resulting in lower sales volumes.

Mr Mhango said SEIFSA was, however, encouraged by the declining PPI for the mining sector. According to StatsSA, PPI in that sector fell from a high level of 22.9% in January 2021, reaching 10.8% in April. In 2020 alone, mining PPI averaged 32.5%, which was the highest since 2017, putting pressure on the financial position of M&E producing companies.

Mr Mhango noted that the uptick in PPI would continue. “As the global economy slowly starts to pick up amid more relaxed COVID-19 lockdown restrictions, with confidence building due to the roll-out of vaccines across the world, global PPI will pick up, along with oil prices and mining producer prices,” he concluded.

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