Johannesburg, 31 October 2019 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is discouraged by a slowdown in the Producer Price Index (PPI) for intermediate manufactured goods, a proxy for selling price inflation in the Metals and Engineering (M&E) sector, as published by Statistics South Africa (Stats SA)
today.
Speaking after the release of the data, SEIFSA Economist Marique Kruger, said the slowdown in the PPI for intermediate manufactured goods is not good news for beleaguered businesses in the M&E cluster of industries, especially when viewed against the backdrop of increased volatility in imported input prices as a result of a generally weak exchange rate.
The Stats SA data showed that on a year-on-year basis, the PPI for intermediate manufactured goods slowed from 1.9 percent in August 2019 to 0.5 percent in September 2019. Correspondingly, the PPI for final manufactured goods for the broader manufacturing sector also registered a slowdown of 4.1 percent year-on-year in September 2019.
“The discouraging slowdown in the PPI for intermediate manufactured goods prevents businesses from leveraging on the improvements in trading opportunities. Business conditions have generally been tough and manufacturers are finding it increasingly difficult to move stock out of the warehouses amid low levels of domestic demand and higher intermediate input costs,” Ms Kruger said.
She added that the situation is exacerbated by increasing energy and fuel prices and a volatile exchange rate, which all add to the individual cost curves of businesses.
She said a selling price increase and positive differential between input cost inflation and selling price inflation is, therefore, imperative and will no doubt go a long way in attracting investment, as investors are often in the quest for guaranteed return on their investments.