Producers contend with over 100% increase in August prices

Sri Lanka’s producer price inflation surpassed 100 percent in August once again, reflecting the persistent nature of the price pressures that are being contended by suppliers across the sectors as Central Bank maintains its tight monetary policy ever to prevent the higher prices getting entrenched.
After briefly falling below 100 percent in July, the August producer prices snapped back to reach 103.4 percent from a year ago reflecting that the price pressures along the producer supply chains haven’t yet run their full course before turning a corner. 
In July, the producer prices rose by 95.4 percent annually, slightly easing from the 102.3 percent reached in June. 

On a monthly basis too, the prices rose by 2.3 percent from July levels but continued to ease from 4.7 percent and 4.9 percent increases in June and May.  
The producer price index is an important barometer to gauge inflationary pressures faced by suppliers at various tiers in the supply chain before reaching the end consumer. 
Usually producer prices in a particular month is better reflected in the consumer price index in the following month as it takes about that time to fully reflect such price pressures in what the end consumers pay at the supermarket or the grocery store.

In September, consumer prices measured by the Central Bank’s preferred gauge of inflation reached 69.8 percent from a year earlier. 
The difference between the two price indices reflects that not all price increases are passed down to the end consumer as companies are assessing the price elasticity for their products before revising their prices up indefinitely.
Too much increase in their prices could result in significant loss of sales which could not even be sufficient to cover their operational cost.
Hence, part of the cost increase is absorbed by companies causing them to trim their margins and thereby profitability. 

On an annual basis, the agricultural prices rose by 96.0 percent in August, manufacturing prices soared by 108.6 percent and the remaining category which comprised utilities such as electricity, gas, steam, air conditioning supply and water supply climbed 2.6 percent.