Producers continue to contend with surging prices across supply chains

• Producer inflation accelerated to 12.2% in Oct. from 11% in Sept. 

Sri Lanka’s producers continue to grapple with persistently higher prices across their supply chains amid still high global commodities prices caused by the wider mismatch between demand and supply around the world, which has been exacerbated by the foreign exchange crunch and the shortages in certain key commodities in the 
local market. 
The Producer Price Index (PPI), the official gauge of supplier inflation, climbed to 12.2 percent during the 12 months through October 2021, accelerating from the 11.0 percent in September. The producer prices measured in October marked the highest since April this year when such prices hit 12.3 percent. 
Meanwhile, on a monthly basis, supplier prices rose by 1.8 percent in October, accelerating from 1.2 percent recorded between August 
and September. 
PPI measures the inflation at the producer level before it hit the end consumer as the former acts as a forerunner for the change in shelf prices of goods.  Sri Lanka’s consumer prices reached a four-year high of 7.6 percent in the 12 months through October before accelerating to 9.9 percent in November, a 13-year high.

Inflation runs hotter in many countries around the world, strengthening the case for major central banks in the world to dial back their stimulus measures sooner and start raising interest rates. 
For instance, the United States on Friday reported their highest consumer inflation in 39-years as prices there rose by 6.8 percent in the 12 months to November, which provided ample evidence for the Federal open Market Committee at the US Fed, which meets this week, to act faster to fend off any more price pressures before they start hitting peoples’ real incomes.
Meanwhile, in a slight improvement, the Census and Statistics Department released its PPI index for October with a 40 days lag, compared to their typical 45 days lag, though there still remains ample room to bring the timeline forward to make the report more meaningful to decision makers both in the public and private sectors.
October prices were driven predominantly by manufacturing sector prices as they surged by 14.2 percent from a year earlier. 
Certain key sub-sectors such as making of wearing apparel saw their prices rising by 15.6 percent while the making of textiles rose by 12.8 percent in costs. 
 Meanwhile, the cost of manufacturing of food products rose by 7.3 percent from a year ago.  Some of the other sectors such as manufacturing of coke and petroleum products saw their prices surging by as much as 70.4 percent, reflecting the climb in crude prices between the two periods. 
Furniture manufacturing saw its costs rising by 29.8 percent in what could be a sign of the higher prices of wooden products in the market.  Reflecting the monthly increase in prices, overall manufacturing sector prices rose by 1.7 percent between September and October.  Agriculture produce prices rose by 2.2 percent annually.