Further increase in the PPI for intermediate manufactured goods is encouraging, says SEIFSA
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The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the latest data for the Producers Price Index (PPI) for intermediate manufactured goods, indicating a further increase in selling price inflation in the metals and engineering (M&E) cluster of industries, Economist Marique Kruger said today.
The data, released by Statistics South Africa today, shows an increase in the PPI for intermediate manufactured goods from 0.7 percent in January 2020 to 1.8 percent in February 2020. However, the increase in the PPI for intermediate manufactured goods is not in line with a slowdown in the PPI for final manufactured goods which dipped to 4.5 percent in February 2020, from 4.6 percent in January 2020.
Speaking after the release of the data, Ms Kruger said the PPI for intermediate manufactured goods is a proxy for selling price inflation in the M&E sector. An increasing trend in the PPI for intermediate manufactured goods, therefore, bodes well for producers in the 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. This is especially given that SEIFSA’s composite input cost index reflects higher costs for businesses,” Ms Kruger said.
She said it is necessary to maintain a positive differential between the selling price inflation and input cost inflation, to sustain current businesses, and also to assist in creating new business opportunities in medium- to long-term.
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