Mining & Quarrying and Manufacturing Indices Increase: More Increases Ahead?

• For July 2023, output prices for producers in the Mining and Quarrying industry increased by 0.2% while prices in the Manufacturing industry increased by 0.6% as released by the Statistical Institute of Jamaica (STATIN).
• The increase in the index for the Mining and Quarrying industry was attributed to a rise in the index for the heavier weighted major group ‘Bauxite Mining & Alumina Processing’ of 0.2%. The increase in the industry’s index was primarily due to the depreciation of the Jamaican dollar vis-à-vis the United States of America dollar.
• For the period under review, the index for the Manufacturing industry increased by 0.6 per cent. The main contributors to this increase were the major groups, ‘Refined Petroleum Products’, up by 4.1% and ‘Food, Beverages &Tobacco’, the highest weighted major group, which increased by 0.2%. These increases were driven by higher crude prices on the international market and higher raw material costs in the index for ‘Bakery Products and Sugar Cocoa, Coffee, Chocolate & Sugar Confectionary. Tempering the upward movement of the industry was a decline of 1.9% in the index for the major group ‘Chemicals and Chemical Products’.
• For the period July 2022 - July 2023, the index for the Mining & Quarrying industry increased by 5.9% mainly due to a similar 5.9% upward movement in the index for the major group 'Bauxite & Alumina Processing. The index for the Manufacturing industry decreased by 1.9% due to a fall of 20.2% in the index for the major group ‘Refined Petroleum Products’. However, there were increases in the index for the major groups ‘Food, Beverages & Tobacco’ (2.9%) and ‘Chemicals & Chemical Products’ (2.8%) ‘
• 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)