Producers grapple with over 10% price increase across supply chains in June

Sri Lanka’s producers contend over 10 percent increase in prices across their supply chains as producer inflation accelerated during June from a month ago when the country was under virus-related restrictions for three weeks while fuel prices were raised. 

According to the Producers’ Price Index (PPI), the key gauge of prices experienced by producers across agriculture and manufacturing sectors, rose by 10.3 percent during the twelve months to June 2021, accelerating from 8.7 percent in May. 

Sri Lanka’s producers have been confronted with near double-digit prices across their supply chains for months before coming ahead in June after the government re-imposed lockdowns and was forced to revise the fuel prices up, pushing up costs from raw materials to additional safety measures employed to machines and factory operations to transport across their value chain. 

Even prior to the fuel price revision, producers confronted higher prices due to supply chain bottlenecks, weaker rupee against the dollar and higher global commodities prices. 

The monthly compiled index by the Census and Statistics Department is a lagging indicator of producer inflation which reflects the underlying reasons for the months-long ascent in consumer prices.

The PPI for major economic activities showed that the producers of agricultural commodities saw their producer prices declining by 2.4 percent in June over the same month last year, but the manufacturing sector experienced 13.3 percent increase in their prices over a year ago. 

Another economic category which identified as electricity and water supply had their prices declining by 2.6 percent in the year to June 2021. 

Under agriculture, production of dairy saw their prices rising by 12.6 percent, while production of eggs reported 10.7 percent decline in their prices in June over the same month last year. 

Meanwhile, growing of cereals and other crops recorded the highest price increase of 19.2 percent while growing of vegetables saw their prices rising by 14.6 percent. 

Growing of fruits, nuts and spice crops had a negative change in their prices by 6.3 percent in June over the same month last year. 

Under manufacturing, every sub-category showed their prices rising in June from a year ago levels including for food and beverages, tobacco products, wearing apparel, textiles, basic metals, coke and refined petroleum, rubber and plastics, electrical machinery and apparatus, and others.