Producer prices of industrial products on the domestic market grew by 30.2% YoY and 3% MoM in September 2022. As expected, the growth in the Energy segment was still by far the largest driver, and if we were to exclude it from the calculation, the growth would amount to 11.5% YoY and 0.7% MoM.

The Croatian Bureau of Statistics (DZS) has published a monthly report on the changes and developments recorded by the industrial sector, and in particular, the industrial producer prices. In the report, we can see that the producer prices of industrial products on the domestic market increased by 30.2% YoY, and 3% MoM. Energy still remains the main driver of this growth, and if we were to exclude it from the producer prices, then the growth would be 11.5% YoY, and 0.7% MoM.

As the current geopolitical situation around the world is putting a lot of pressure on prices, especially commodities (gas and oil in particular) and by extension, energy prices, the trend of growth in producer prices is still unlikely to stop. Considering this is only one factor that is influencing this, with wider inflationary pressures from the supply chain disruptions that we witnessed in the last year – year and a half, combined with the ever-growing recession fears, again, the trend of growth is unlikely to stop, as none of these issues have a permanent solution on the horizon.

If we were to look at the producer prices growth by segments, on an MoM basis, prices in Energy increased by 7.9%, in Durable consumer goods by 2.2%, in Non-durable goods by 0.9%, in Intermediate goods by 0.6%, while in Capital goods, a 0.1% decline in prices was recorded. However, if we were to look at the YoY price change, the picture is a lot more profound. PPI in the Energy segment increased by 81.5%, in Durable goods by 13.5%, in Non-durable consumer goods by 13.2%, in Intermediate goods by 11.3%, and in Capital goods by 5.7%.

Meanwhile, looking at the producer price change by sectors, prices in Mining and quarrying grew by 135.8% YoY, in Electricity, gas, steam, and air conditioning supply by 59.7%, and in Manufacturing by 16.6%.

Producer prices of industrial products (June 2016 – September 2022, YoY, %)

What is also interesting is the fact that the prices have partially spilled over to segments other than energy. Even though the prices in the Energy segment have increased the most, by far, if we look at other sectors, we can see prices increasing as well. Of course, all industry requires energy to operate, so a prolonged period of higher energy will have spillover effects. Also considering that supply chains have been really strained for the majority of 2021 and the majority of 2022 as well. Combined with the sanctions against Russia and the war in Ukraine, both of which are having an impact on a lot of exports from these countries. Exports of oil, gas, wheat, precious metals, but also fertilizers in Russia’s case, and wheat, sunflower, and several precious metals and gases in Ukraine’s case are lacking and this puts even higher pressure on the supply. The fact that China has strict COVID-19 policies in place is also putting a strain on the global supply, as the country is at the same time one of the largest exporters of certain products (precious metals, food), but also one of the largest importers of other commodities, primarily oil and gas. All of these factors combined are among the few of challenges that are unlikely to get fixed in near future. As such, it’s extremely hard to predict how will these prices change, as all of these factors are also increasing the likelihood of a recession.