JOHANNESBURG – The increase in producer price inflation (PPI) bodes well for producers in the Metals and Engineering (M&E) Sector as it provides them with an opportunity to recover from the losses incurred due to COVID-19 lockdown restrictions, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
PPI data released today by Statistics South Africa (Stats SA) shows that prices for intermediate manufactured goods increased from 16.4% in June 2021 to 17.6% in July 2021. PPI for intermediate goods has averaged 12.9% for the first seven months of the year up to July. PPI for the mining sector, which is a key raw material supplier to the M&E Sector, fell from 20.6% in June 2021 to reach 15.3% in July 2021, averaging 16.7% in the first seven months of 2021.
SEIFSA Chief Economist, Mr Chifipa Mhango said the Federation welcomed the increase in PPI, which is a proxy for selling prices of M&E products, as it will support higher revenue as demand conditions improve and input material prices trend lower.
“It is imperative that companies in the sector take advantage of the rising selling prices and uptick in demand from inter-linked industries to boost production,” he said, adding that increased production and investment could provide an impetus to boost job creation.
Mr Mhango said the current low inflation environment is also encouraging as it can also signal reduced costs of doing business. Consumer inflation remains within the monetary policy target range of 3% to 6%, having come in at 4.6% in July 2021, which was lower than the 4.9% recorded the previous month.