Johannesburg, 25 November 2021 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the continued improvement in the Produce Price Index (PPI) for intermediate manufactured goods, as reported by Statistics South Africa (Stats SA) today.
“PPI data has improved consecutively from January this year, alongside the PPI for final manufactured goods. This is good news for the broader manufacturing sector and specifically the Metals and Engineering (M&E) sector against the backdrop of the coronavirus pandemic, lootings, industrial action and increased volatility in imported prices as a result of a generally weak exchange rate”, says SEIFSA Economist Palesa Molise.
The Stats SA data shows that on a year-on-year basis, the PPI for intermediate manufactured goods increased to 20.4 percent in October 2021, from 19.5 percent in September 2021. The main contributors to the annual rate were: chemicals, rubber and plastic products, basic and fabricated metals, saw-milling and wood. PPI for final manufactured goods for the broader manufacturing sector also increased to 8.1 percent in October 2021, up from 7.8 percent in September 2021 on a year-on-year basis.
“Given that the PPI for intermediate manufactured goods has maintained an upward trajectory since January 2021, an increasing trend in the PPI for intermediate manufactured goods bodes well for the broader manufacturing sector. This assist businesses to be more competitive considering that businesses have been struggling with increases in input costs. Rising fuel prices and energy costs remain a concern, especially given the current challenging economic environment, characterised by weak domestic demand and declining employment numbers. Better PPI for intermediate manufactured goods amounts to some good news for producers in the M&E sector, who now have some lee-way to recover the losses incurred as a result of volatile input costs which will add to the bolstering of margins”, said Molise.
During this immediate period of recovery from the recent industrial action in the steel and engineering sector, businesses will be seeking to leverage off the improvement in selling price inflation amidst the on-going uncertainties around a possible fourth wave, on-going and intermittent load-shedding and the possible reintroduction of harsher COVID-19 adjustment levels.