Johannesburg, 28 February 2018 – The latest release on the Producer Price Index (PPI) for intermediate manufactured goods published by Statistics South Africa (Stats SA) today reflects a further deterioration in selling price inflation in the metals and engineering (M&E) sector, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
The Stats SA data showed that the PPI for intermediate manufactured goods decreased to 1.5 percent year on year in January 2018, from the 3.2 percent recorded in December 2017.
“This a poor performance, especially given the four consecutive months of PPI increases for intermediate manufactured goods prior to December 2017,” SEIFSA Economist Marique Kruger said.
Also, given the volatility of input costs in the sector, the deceleration in the PPI data leaves manufacturers with little leeway to pass cost increases on to the market. Correspondingly, SEIFSA’s composite input cost index, which tracks the average cost structure for the M&E sector, was recorded at 1.4 percent in January 2018, up from 3.4 percent in December 2017.
Ms Kruger said it is important to maintain a positive differential in the selling price inflation and input cost inflation in order for the sector to stay attractive for existing and new investments.
“Hopefully, the PPI for intermediate manufactured goods will rebound against the backdrop of a continued improvement in business confidence, especially in light of recent developments in South Africa’s political landscape,” Ms Kruger said.
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