Producer price inflation hits new all-time high of 52.4%

The producer prices touched a new all-time high in April reflecting that the supplier inflation is charging ruthlessly before getting passed down to the consumers by way of consumer price inflation, which also hit 40 percent in May.  

The prices at the producer level measured by the Producer Price Index (PPI) surged 52.4 percent in April 2022 from the same month last year, accelerating from 34.6 percent in March and 18.9 percent in February before rupee weakness hit the economy.  

Meanwhile, the prices measured on a monthly basis also rose by 15.2 percent in April, comparable level with the increase between February and March, with the bulk of the pressures coming from the manufacturing sector which is more exposed to imports than agriculture. 

Agriculture price increase between the two months was much more modest at 3.3 percent. 
Meanwhile, the other remaining category which captures utilities such as electricity, gas, steam, air conditioning supply and water supply displayed a surprise 2.3 percent decline in the index, measured on a monthly basis and 2.8 percent decline on an annual basis. 

But, the Department of Census and Statistics didn’t provide reasons for the decline, although businesses are bearing an enormous burden on their gas as prices rose several times during last year.   

PPI measures the inflation at the supplier level before it reaches the end consumer and the index is published with a 40-day time lag compared to the Colombo consumer price index released at the month end.

While Sri Lanka could have avoided hyperinflation had it resisted free floating of its currency in March, the country could not escape price pressures coming from the global and local supply chains. 

What could exacerbate the current prices are the rising energy prices and the protectionist tilt adopted by some major commodities exporter nations in favour of safeguarding their own population against rising global inflation. 
The developing world is facing a hunger crisis and Sri Lanka is at its forefront as the country neither has the local production capacity nor the means to import food stuff to make up for the loss of produce.