PPI Components Show Declines

• For June 2023, output prices for producers in the Mining and Quarrying industry increased by 1.2% while prices in the Manufacturing industry increased by 0.2% as indicated by data released by the Statistical Institute of Jamaica (STATIN).
• The increase in the index for the Mining and Quarrying industry in June was attributed to a rise in the index for the heavier-weighted major group ‘Bauxite Mining & Alumina Processing’ of 1.2%. The index for the other major group, ‘Other Mining & Quarrying’, moved up by 0.3%. A depreciation of the Jamaican dollar vis-à-vis the United States of America dollar also aided in the increase in the Index.
• The main contributors to the increase in the Manufacturing industry were the major groups, ‘Refined Petroleum Products’ (0.9%) and ‘Paper and Paper Products’, which increased by 2.0%. These increases were driven by higher petroleum commodities and higher production costs, respectively. Tempering the upward movement of the industry was a decline of 0.1% in the index for the major group ‘Food, Beverages & Tobacco’ and ‘Chemicals and Chemical Products’ down by 0.5%. The decline in the former group was due to a decline in the index for the group ‘Manufacture of Grain Mill Products, Starches and Starch Products’, a result of lower prices for wheat on the international market, while the fall in the index of ‘Chemicals and Chemical Products’ was driven by a reduction in freight and packaging costs.
• For the period June 2022 - June 2023, the index for the Mining & Quarrying industry decreased by 4.6% mainly due to a 4.9% fall in the index for the major group 'Bauxite & Alumina Processing’. For the same period, the index for the Manufacturing industry decreased by 3.3% mainly as a result of a decline of 26.8% in the index for the ‘Refined Petroleum Products’ major group. However, the decline in the index for the industry was moderated by an increase of 3.0% in the index for the heaviest-weighted major group ‘Food, Beverages & Tobacco ‘
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experience over time. There was a minor dip in the PPI in June, however, the decision by OPEC+ to curtail oil supply could potentially escalate producer prices. This is due to the fact that a reduction in oil supply could drive up costs related to transportation and electricity. However, the supply cut has failed to significantly influence oil prices thus far.
• The recent development of Russia backing out of the grain deal could indeed have implications for food prices, and subsequently, the PPI. If the withdrawal from the deal leads to a shortage in grain supply, it could drive up the cost of grain-based products. This could result in an increase in the index for the major group 'Food, Beverages & Tobacco', thereby influencing the overall PPI. However, the extent of this impact would depend on the severity of the grain shortage and the responsiveness of the market to these changes.

 

(Source: STATIN)