PPI shows stagnant inflation figures
PRODUCER inflation – as measured by the producer price index (PPI) – for final manufactured goods slowed in February on the back of high food products, minerals and transport equipment.
Statistics South Africa (StatsSA) said yesterday that the annual PPI for final manufacturing was 4.5 percent in February, down from 4.6 percent in January.
StatsSA said the main contributors to the headline PPI annual inflation rate were the 6.8 percent increase in coke, petroleum, chemical, rubber and plastic products.
Food products, beverages and tobacco products increased by 3.7 percent year-on-year, while metals, machinery, equipment and computing equipment rose by 4.4 percent yearon-year.
Transport equipment increased by 6 percent year-on-year.
On a month-to-month basis, the PPI increased by 0.3 percent as food products, beverages and tobacco products increased by 0.6 percent during the period.
Investec economist Lara Hodes said monthly consumer price inflation readings had remained largely anchored around the mid-point of the inflation target range.
Hodes said fuel price pressure should abate considerably going forward as international oil prices have plummeted amid a marked slowdown in global growth, caused by the coronavirus pandemic.
“However, further global growth pressure from the coronavirus pandemic continues to weigh on commodity exporting countries, while fiscal risks make South Africa susceptible to a ratings downgrade,” Hodes pointed out.
“The domestic currency remains volatile and a potential upside risk to the inflation profile,” she said.
StatsSA data showed that the PPI for intermediate manufactured goods showed an increase from 0.7 percent in January to 1.8 percent in February.
The main contributors to the annual rate were basic and fabricated metals and saw milling and wood, while basic and fabricated metals contributed to the monthly rate.
Marique Kruger, an economist at the Steel and Engineering Industries Federation of Southern Africa (Seifsa), said the increase was encouraging.
Kruger added that an increasing trend boded well for producers in the metals and engineering sector who have the leeway to recover the losses incurred due to volatility in input costs, thereby enabling them to improve on margins.
“An increase in the PPI for intermediate manufactured goods has the potential of improving the existing positive differential between input cost inflation and selling price Inflation,” Kruger said.
“This is especially given that Seifsa’s composite input cost index reflects higher costs for businesses.”
Kruger said it was necessary to maintain a positive differential between the selling price inflation and input cost inflation to sustain businesses, and also to assist in creating new business opportunities in the medium to long term.