In July the PPI for Final Manufactured Goods recorded a disinflationary reading, with the index recording a 3.3% increase when July 2015 is compared to July 2014. This is down from the 3.7% year-on-year reading recorded in June 2015.
Of concern to the metals and engineering sector was the deflationary pattern in the PPI for Intermediate Manufactured Goods, which recorded a -0.3% when July 2015 is compared to July 2014. This reading is a continuation of the -0.4% recorded a month earlier.
“We continue to observe a very similar pattern in the in-house data that we track at SEIFSA. If we consider steel prices alone, they are down on average 10.2% between January 2015 and July 2015,” Mr Chibanguza said.
He added that when the first seven months of 2015 are compared to the same period in 2014, the prices are down 5.1%. On an annualised 12 months to July 2015 compared to 12 months to July 2014; prices are down by 1.2%.
“This is deeply concerning because, to the metals and engineering sector factory gate prices are the selling prices of the sector, which also entails profit margins.
Manufactures in the sector face headwinds from multiple directions namely: the weakening currency, electricity disruptions, the cost of alternative energy sources and decreasing labour productivity. Furthermore, their margins are further squeezed by the decline in their selling prices,” Mr Chibanguza said.