Deflation in producer prices persists through January

The deflationary conditions, which have persisted for many months since around the middle of last year, continued through January, as the prices contended by the producers across the industries have fallen by 3.0 percent from a year ago.

What is officially referred to as the Producer Price Index, measured by the Census and Statistics Department, has been on a decline since June last year, around the same time the consumer prices also turned around quite notably.

The producer prices provide a forerunner for what could look like the consumer prices.

In February, the consumer price inflation, according to the officials’ preferred Consumer Price Index, softened to 5.9 percent over the last 12 months, from 6.4 percent in January, as the supply conditions improved while the one-off impacts from the Value Added Tax hike were dissipating.

On a month-on-month basis however, the producer price rose by 2.0 percent, with the highest increase seen in prices in the agricultural sector. The prices in the agricultural sector rose by 5.8 percent in January from the December 2023 levels.

The agricultural sector went through much during this period, due to the extreme weather conditions, which in fact was seen in astronomically higher vegetable and overall food prices until lately.  

The prices are however moderating, although they are still far from where they were.

Meanwhile, the manufacturing sector prices rose by 1.5 percent in the month, a fairly modest increase compared to the impact coming from the Value Added Tax hike.

It appears that the manufacturers are largely compelled to absorb a large part of the cost increases from their margins, as there has recently been a push back from the consumers for higher-priced products.

Meanwhile, the utility group, consisting of electricity, gas, steam, air conditioning and water supply, ticked higher by 0.6 percent in January from a month ago.