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Price Producer Index continues to fall

CAIRO: Egypt’s Price Producer Index (PPI) fell considerably in November for the fifth straight month, as energy prices continued to plummet, according to government statistics agency CAPMAS’ report released Sunday. The PPI skidded to 11.86 percent in the year to November, well down from October s reading of 16.9 percent. A plunge in crude oil …


CAIRO: Egypt’s Price Producer Index (PPI) fell considerably in November for the fifth straight month, as energy prices continued to plummet, according to government statistics agency CAPMAS’ report released Sunday.

The PPI skidded to 11.86 percent in the year to November, well down from October s reading of 16.9 percent.

A plunge in crude oil costs triggered a drop in prices of mining and quarrying item, which in turn helped drag the index down, explained Reham El Desoki, economist at investment bank Beltone Financial.

The global economic downturn – spawned by the collapse of the U.S. housing market – has suppressed demand for oil and sent prices plunging worldwide.

Crude oil hovered around $46 a barrel on Friday after touching $34 earlier in December, its lowest level in four and a half years. Oil is $102 off its July peak, shedding value as a global recession cuts into fuel demand.

On the other hand, prices for agriculture and fishing items surged 22.8 percent in November up from 18.1 percent a month earlier.

“Prices of agricultural goods have been rising but by a slower pace since July . in the lead up to year-end holidays as seasonally expected this time of the year, El Desoki explained.

The PPI’s November figure has tumbled from a peak of 33.7 percent in the year to June that was fueled by higher commodity prices and economic growth.

Economists expect consumer price index (CPI) figures for December – due early next week – to further slide albeit at a much slower pace than producer inflation.

“In theory, when producer prices go down, retailer prices follow suit, but that doesn’t necessarily happen [in reality] because retailers [tend] to take large profits, El Desoki pointed out.

“The sharper fall in PPI relative to CPI either means that retailers are taking larger profit margins and/or that there are other indirect costs to retailers, she said explaining that the difference between both indices mainly defines the profit margin to retailers in the absence of extra costs.

Consumer inflation dipped to 20.3 percent in the year to November from a 16-year high of 23.6 percent in August as global food and commodity prices retreated in tandem with the global economic downturn.

Still, higher than desired inflation rates pressured the central bank to keep its benchmark interest rates steady for the second time in a row on Dec. 26.

Central Bank Governor Farouk El-Okdah said on Dec. 21 the bank would only ease monetary policy at the right time, when we can control inflation .

His comments were seen as emphasizing the bank s main aim – price stability – over the government s goal of pushing growth.

“The central bank is still closely watching inflation rates, El Desoki pointed out, forecasting the bank could cut rates in its next meeting in February.

“By the time they convene in February, they will have had two months worth of data on inflation; December and January.

She expects consumer inflation to close out the year just below 20 percent.

Topics: FJP

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