Mixed blessing for consumers, manufacturers

THE Statistics SA Producer Price Index (PPI) for final manufactured goods slowed to 3.3% year-on-year in March from 4.5% in February, providing a mixed blessing for consumers and manufacturers.

This marks the softest increase since November last year. On a monthly basis, the index rose a mere 0.1%.

Fund Manager at Anchor Wealth and asset management, Casey Delport, said: “Overall, this is good news for consumers and businesses alike. Higher producer prices mean consumers will pay more at the tills, whereas lower producer prices likely mean consumers will pay less at the retail level.

“This will provide some small comfort as South African households come under increasing strain amid the national lockdown and Covid-19 pandemic,” said Delport.

However, the persistent dip in the intermediate PPI is adding further strain to embattled manufacturers operating in the metals and engineering sector.

Steel and Engineering Federation of South Africa (Seifsa) economist Marique Kruger said: “Given the prevailing tough conditions, the added pressure in the form of decreasing selling prices is disconcerting to companies which are unable to pass on increased cost pressure from factors affecting supply on to the market.

“Businesses in the broader manufacturing sector in general and the M&E cluster of industries in particular are operating under increasingly difficult conditions.

“The decreasing PPI prevents companies from improving on tight margins,” said Kruger.

Lukman Otunuga, senior research analyst at FXTM said: “If the SA Reserve Bank was looking for another opportunity to cut interest rates, the latest producer prices figure for March may have provided a valid argument.”