PPI figures encouraging, says expert

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) yon Monday welcomed the increase in the Producer Price Index (PPI), as per the data released by Statistics South Africa (Stats SA), and hoped businesses would benefit from the positive trajectory via higher selling prices.

Seisfa chief economist Michael Ade described the data as encouraging, especially considering that selling prices have been rising since April and May, spanning the Covid-19 pandemic-induced economic lockdown Levels 4 and 5.

He said the selling price inflationary trend augurs well and should help in reducing operational cost pressures on businesses and boost margins, since companies will now have a leeway to pass cost increases to intermediate and final consumers.

“It has been a tough year for local producers. Businesses have operated under increasingly difficult conditions, unpredictable electricity supply, distortions in the local and regional supply chains, insufficient domestic demand, variable input cost prices and persistent operational costs, despite not manufacturing or selling,” Dr Ade said.

He added that the latest PPI data would build on last month’s progressive data and continue to provide distressed businesses with the opportunity to manoeuvre around cost, push inflation, towards their sustainability.

However, Dr Ade said companies cannot invariably increase selling prices due to countervailing factors like insufficient demand and poor consumer spending.

These factors remain significant challenges to the Metals and Engineering industries.

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