Johannesburg, 28 February 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is concerned about a further decline in the Producer Price Index (PPI) data for intermediate manufactured goods as released by Statistics South Africa (Stats SA) today.

SEIFSA Economist Marique Kruger said the latest PPI data affirm a further decrease in selling price inflation for the sub-industries in the metals and engineering (M&E) cluster.

The data show that the annual change in the PPI for intermediate manufactured goods, which is measured in factory gate prices, slowed from 5 percent in December 2018 to 3.8 percent in January 2019. The deceleration in the PPI for intermediate manufactured goods is in line with a slowdown in the PPI for final manufactured goods, which decreased to 4.1 percent in January 2019, from 5.2 percent in December 2018.

“The PPI for intermediate manufactured goods is a proxy for selling price inflation in the M&E sector. A decreasing trend in the PPI for intermediate manufactured goods, therefore, does not bode well for producers in the sector, who have less leeway to recover the losses incurred due to volatility in input costs, thereby preventing them from improving on margins,” Ms Kruger said.

She added that a lower trending PPI for intermediate manufactured goods was concerning, especially given the current volatility of input costs for the sector, which is captured by SEIFSA’s composite input cost index.

“A deterioration in selling price inflation has the potential of eroding the existing positive differential between input cost inflation and selling price inflation. This is disappointing news for businesses, which may not be able proceed with business operations, despite a slowly improving domestic economy,” Ms Kruger concluded.

SEIFSA is a National Federation representing 23 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.