DECREASE IN SELLING PRICE INFLATION WILL HURT BUSINESS FURTHER

CEFA

Johannesburg, 30 January 2020 – The decrease in the selling price inflation will have
the effect of preventing companies in the Metals and Engineering (M&E) sector from
improving margins, the Steel and Engineering Industries Federation of Southern Africa
(SEIFSA) said this morning.

The latest producer price index (PPI) data published by Statistics South Africa (Stats SA)
today indicates that the annual percentage change in the PPI for intermediate
manufactured goods decreased from -1.1 percent in November 2019 to -1.5 percent in
December 2019. This is inconsistent with the annual change in the PPI for final
manufactured goods, which improved from 2.3 percent in November 2019 to 3.4 percent
in December 2019.

Speaking after the release of the data, SEIFSA Economist Marique Kruger said
businesses in the broader manufacturing sector in general and the M&E cluster of
industries in particular still operate under increasingly difficult conditions. The situation,
she said, is further exacerbated by low domestic demand and volatility in input costs
underpinned by a volatile exchange rate.

“Given the tough conditions, the added pressure in the form of decreasing selling prices
is discouraging as companies are unable to pass cost increases on to the market,” said
Ms Kruger.

However, Ms Kruger said she remains hopeful that the PPI for intermediate manufactured
goods will rebound and provide a profitable buffer for businesses, since it is imperative to
maintain a positive differential between the selling price inflation and input cost inflation
to ensure that healthy margins are maintained.

Issued by:
Ollie Madlala
Communications Consultant
Tel: (011) 298 9411 / 082 602 1725
Email: ollie@seifsa.co.za
Web: www.seifsa.co.za

 

SEIFSA is a National Federation representing 21 independent employer Associations in
the metals and engineering industries, with a combined membership of 1600 companies
employing around 200 000 employees. The Federation was formed in 1943 and its
member companies range from giant steel-making corporations to micro-enterprises
employing fewer than 50 people.