By the end of January 2023, producer prices of industrial products on the domestic market grew by 19.2% YoY, and 0.9% MoM.
The latest producer prices of industrial products (PPI) overview has recently been published by the Croatian Bureau of Statistics, DZS. In the report, we can see that the producer prices of industrial products increased by 19.2% YoY, and 0.9% MoM in January 2023. Meanwhile, producer prices excl. Energy increased by 0.7% MoM, and 10.9% YoY, showing us that other input costs besides energy, such as prices of material/commodities and other goods required for production have also increased. This would also indicate that even though the initial surge in PPI was driven by higher energy costs, as the prices of energy have somewhat stabilized in the last couple of months, the higher prices have spilled over to other segments of the industry. This would also mean that it would take longer for these prices to stabilize and start declining, as they are not under the influence of only higher energy prices anymore.
Breaking the PPI by categories, on a YoY basis, the producer prices in the Energy category grew by 42.1%, in Non-durable consumer goods by 14.3%, in Durable consumer goods by 12.8%, in Intermediate goods by 8%, while in Capital goods they grew by 5.5%. Meanwhile, on a MoM basis, the largest growth was recorded in Non-durable consumer goods and Energy, both at 1.2%, followed by Intermediate goods at 1%, Durable consumer goods at 0.9%, while they recorded a decrease in Capital goods, at 0.4%.
Producer prices of industrial products (June 2016 – January 2023, %)
Source: DZS, InterCapital Research
Next up, we have the breakdown of the producer prices of industrial products by sector. On a YoY basis, the largest growth was recorded in prices in Electricity, gas, steam and air conditioning supply, which increased by 59.4%, followed by Manufacturing at 11.8%, and Water supply; sewerage, waste management and remediation activities, by 1.7%. On the other hand, Mining and quarrying recorded a decrease in prices of 13.5%.
At the same time, on a MoM basis, producer prices in Mining and quarrying grew by 1.2%, in Manufacturing by 0.9%, and in Electricity, gas, steam and air conditioning supply by 0.7%. If the trend from the year is anything to go by, then the continued growth in the PPI will inevitably spill over to the CPI. As these prices are under continued pressure, and further uncertainty is also present, especially when it comes to energy costs, the PPI in the upcoming period could go either way. The only question then is, will the producers shoulder the higher costs, pass them to consumers, or do a combination of these things? Of course, producers have proven quite resilient when it comes to higher costs, and thus far have managed them effectively, never passing the entire cost to the end consumer, while at the same time, trying to maintain as much of their profitability margins & market shares as possible.