Johannesburg, 25 July 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is disappointed by the Producer Price Index (PPI) data for intermediate manufactured goods released by Statistics South Africa this morning, the Federation’s Economist, Marique Kruger, said.
The latest PPI data reflect a decrease in selling price inflation for the sub-industries in the metals and engineering (M&E) cluster in June 2019. The data show that the annual percentage change in the PPI for intermediate manufactured goods, which is measured in factory gate prices, slowed to 4.5 percent in June 2019, from 6.4 percent recorded in May 2019. Contemporaneously, the PPI for final manufactured goods for the broader manufacturing sector also dipped to 5.8 percent in June 2019, from 6.4 percent in May 2019.
“Against the backdrop of stagnant domestic demand, high electricity costs, rebounding petrol prices and increasing operational costs, the slowdown in the PPI for intermediate manufactured goods is worrisome for companies in the sub-components of the M&E cluster, as there is little leeway to pass cost increases on to the market,” Ms Kruger said.
Additionally, the current volatility of input costs for the sector, as captured by SEIFSA’s composite input cost index, shows the stress level faced by businesses, and a lower trending PPI for intermediate manufactured goods is worrisome. Ms Kruger said a deterioration in selling price inflation has the potential of reducing the positive differential between input cost inflation and selling price inflation, which may act as an impediment for new investments and as a constraint to existing operations.
Ms Kruger said the Federation expects a rebound in selling price inflation in order to improve business prospects, underpinned by an uptick in demand and domestic growth.