Producer prices soar 18.9% in February, ahead of March shock on prices 

Sri Lanka’s producer prices jumped 18.9 percent in the twelve months to February 2022, accelerating from the 17.3 percent in January, hitting a fresh high ahead of the rupee float causing runaway prices in the following month. 

The annually measured consumer prices in Colombo district hit 18.7 percent in March, the highest value since November 2008 as the first round effects of the rupee float on March 7 rammed through the products and services as producers changed sticker prices of all products and services within weeks to reflect the weaker currency. 

Since March 7, Sri Lankan rupee has shed 60 percent of its value against the United States dollar, precipitating into the world’s worst-performing currency.  The Central Bank’s inflation projections said the consumer prices could peak at 28 percent in the next three months before it begins to gradually fall as it raised policy rates sharply to rein in demand.

Although the data is lagging by a lot, the producer prices provide a forerunner for how the consumer prices would look like in the following month. 

Producer prices measured on a monthly basis also showed a sharp acceleration by 2.8 percent in February, the highest ever increase from 0.8 percent increase in January. 

Inflation is a global phenomenon and no economy, except for Japan, are among major economies spared from its vagaries.  For instance, in the United States, the producer prices rose by 11.2 percent in the twelve months to March, the highest on record, up from 10 percent in February, the data released on Wednesday (April 13) showed. 

The US Labour Department on last Tuesday (April 12) released their Consumer Price Index rising at 8.9 percent in March, the highest since December 1981 and up from 7.9 percent in February 2022.  

The Reserve Bank of New Zealand lifted its official interest rates by 50 basis points, the most in 22 years to 1.5 percent on Wednesday (April 13) due to increasing worries about the surging inflation exacerbated by the Russia-Ukraine crisis. 

Meanwhile, the United Kingdom reported 7 percent consumer inflation for March, its highest inflation in 30 years on Wednesday (April 13). 

In Sri Lanka, agriculture prices rose the most by 22.6 percent signalling higher food prices while the manufacturing prices jumped 18.5 percent from a year earlier. 

Meanwhile, other category consisting of electricity, gas, steam and air conditioning and water supply registered an increase in cost of 6.7 percent annually, pushing up the overall producer price index in February.