Producer prices of industrial products on the domestic market increased by 23.6% YoY, and 0.9% MoM in October 2022. If we were to exclude the growth in the Energy segment, the increase amounted to 11.8% YoY, and 0.7% MoM.
The Croatian Bureau of Statistics, DZS, recently published a monthly report on the developments of the industrial producer prices in Croatia, and by extension, the industrial sector. According to the report, the producer prices of industrial products continued growing in October 2022, increasing by 23.6% YoY, and 0.9% MoM. Even though we have seen somewhat of a stabilization in gas prices in the last couple of weeks, as well as the fact that starting from October 2022, the Croatian govt. capped the prices of gas, electricity, and heating for both households but also businesses, one would expect a slowdown in growth. However, this has not yet proven to be the case, and the reasons for this are multiple. First of all, the agreed price caps, for example, gas, are still multiple times higher YoY. Inflation is rampant, and this means that the spillover to other segments of the industry, besides just the energy costs, has happened.
Even so, energy still remains the main driver of growth of industrial producer prices, and if we were to exclude it, then the growth would amount to 11.8% YoY, and 0.7% MoM. One other thing that should be noted is that the industrial prices back in October 2021 were already elevated due to commodity price increases and supply chain shortages, and because of the higher base, the 23.6% overall increase YoY is even more significant.
Looking at the changes on the yearly basis, on the domestic market, producer prices in the Energy segment increased by 56.2%, followed by the increase in Non-durable consumer goods by 13.5%, in Durable consumer goods by 12.5%, in Intermediate goods by 11.5%, and finally, an increase in the prices of industrial products in the Capital goods of 6.3%. On a monthly basis, the increase in producer prices in the Energy segment amounted to 1.3%, in Non-durable consumer goods it amounted to 0.9%, in Capital goods it amounted to 0.8%, in Intermediate goods it amounted to 0.6%, and finally, in Durable consumer goods, it actually decreased by 0.6%.
Looking at the producer price changes by sectors, on a yearly basis, prices in Electricity, gas, steam and air conditioning supply increased by 63.9%, in Mining and quarrying by 44.4%, in Manufacturing by 13.9%, while in Water supply, they increased by 1.6%. Meanwhile, on a monthly basis, producer prices in Electricity, gas, steam and air conditioning supply increased by 5%, in Manufacturing by 0.3%, while in Mining and quarrying, they decreased by 10.4%.
Producer prices of industrial products (June 2016 – October 2022, YoY, %)
Source: DZS, InterCapital Research
We have witnessed growth in producer prices for over a year now, and this growth has spilled over to every industrial segment. As such, it is directly affecting the prices of products sold. What this data can tell us is that there has been some slow down and even decline in prices recorded. However, several things have to be considered. First of all, only a month has passed since the government’s implementation of its economic support measures. Second, and in this case more important, all the underlying drivers of growth in prices, for producers and consumers alike, are still present. The current situation is quite uncertain, with a lot of potential for becoming even worse. Furthermore, with winter coming, even stronger pressure will be put on the energy system and the underlying commodity supply which is used to power the said system, and as such, more strain on the prices could be expected.
