Local producer prices surge 17.3% in Jan., highest in recent times

The producer prices surged 17.3 percent in January 2022 over the same month in 2021, touching the highest level in recent history, reflecting that the rising commodities prices are running through the production supply chains more acutely. 

The Producer Price Index (PPI) compiled by the Census and Statistics Department measures the inflation confronted by the producer before reaching the consumer and is a forerunner for the consumer inflation. However, the PPI comes with a 40-day lag. 

The two key contributors to the PPI, the agriculture activities and manufacturing activities, rose by double digits, pushing the overall producer prices to high teens. 

However, the monthly prices decelerated to 1.8 percent, from 2.5 percent in December 2021. 

Meanwhile, in the United States, the producer prices, which were released on Tuesday, showed their prices having jumped 10 percent in the 12 months to February, with two-thirds of the price increase stemming from the cost of energy, which rose to multi-year highs, due to the Russia-Ukraine war in the final week of February.  The monthly prices have risen by 0.8 percent there, the biggest monthly gain tracing back to 2009.  In Sri Lanka, the prices of agriculture rose by a whopping 22.5 percent in the 12 months to January 2022, accelerating from 19.9 percent in the 12 months through December 2021. 

The sub-activities of the agriculture sector, which are growing of perennial crops, climbed in prices by 8.0 percent over the previous month while non-perennial crops and animal production had negative growths of 2.4 percent and 0.4 percent, respectively from December levels.   Meanwhile, the manufacturing sector prices rose by 17.6 percent from a year ago while the monthly prices added 1.9 percent over December levels. Majority of the sub-sectors in manufacturing recorded price gains with only manufacturing of rubber and plastic products, beverages, coke and refined petroleum products recording negative growth and neutral levels, respectively. 

Sri Lanka is bracing for higher prices with the rupee floating last week, as the prices from energy to transportation to everything associated with imports or not, are expected to rise, while the conflict in Eastern Europe is also pushing up prices of commodities. 

However, oil at the Brent, the global benchmark briefly came down below US $ 100 a barrel on Tuesday after nearing US $ 140 a barrel last week, due to lockdowns in China over Omicron surge as the oil traders fretted over the easing demand conditions from the world’s second largest economy.