The Producer Price Inflation (PPI) rate for the month of August 2019 has increased to 10.2 per cent.
The rate indicates that between August 2018 and August 2019 (year-on-year), the Producer Price Inflation went up to 10.2 per cent and represents a 1.4 percentage point increase in producer inflation as compared to the 8.8 per cent in July.
What is Producer Price Index?
The producer price index, or PPI, is a collection of indicators that measures and defines the average movement in selling prices from domestic production over time. The index measures average price movements from manufacturers and sellers’ point of view. It therefore considers costs as it affects various suppliers of goods and services
Producer Price Inflation analysis
Announcing the new rate at a news conference, the Deputy Government Statistician, Mrs Araba Forson, said the Producer Price Inflation in the mining and quarry sub-sector increased by 8.9 per percentage points over the July 2019 rate of 27.6 per cent to record 36.5 per cent in August 2019.
“The producer inflation for manufacturing which constitutes more than two-thirds of total industry, increased by 0.4 percentage points to record 5.8 per cent.
“The utilities sub-sector recorded the same inflation rate of 6.9 per cent as the rate for July 2019,” she noted.
She added that in August 2018, the price inflation rate for all the industry was 7.0 per cent but declined to 5.8 per cent in September 2018.
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She continued that the rate increased to 7.2 per cent in October 2018 but declined consistently to 3.4 per cent in January 2019.
“Since then, the rate resumed an upward trend to record 7.1 per cent in April 2019 but declined to 6.7 per cent in May 2019” adding that subsequently, the rate increased consistently to record 10.2 per cent in August 2019”.
In the manufacturing sector, in August 2019, seven out of the 16 major groups in the manufacturing sub-sector recorded inflation rates higher than the sector average of 5.8 per cent.
“Manufacture of machinery and equipment recorded the highest inflation rate of 24.7 per cent, while tanning and dressing of leather recorded an inflation rate of 0.0 per cent,” she stated.
Petroleum Price Index
About petroleum price index, the producer inflation rate in the petroleum sub-sector which was 41.6 per cent in August 2018 decreased to 31.1% in September 2018.
The rate increased consistently to record 17.2 per cent in April 2019, but it however decreased again to 1.2 per cent in June 2019.
What Does this increase imply?
An increase in Producer Price Index implies an overall increase in cost of production from suppliers’ point of view. Are suppliers prepared to solely bear the entire increase or to offload a percentage to consumers? How suppliers and manufacturers finally decide to manage this increase will eventually influence final selling prices of products in the various sectors. Consequently the consumer price index may inch up if there should be increase in final selling price of products coming from the various sectors.