Industrial PPI increased by 3.3% y/y in March, thus accelerating from 2.7% y/y growth in February, the stats office reported on Friday. This is the second consecutive month of industrial producers’ prices growth speeding up after three straight months of deceleration (through January). The reported in March acceleration was driven by both domestic and export industrial producers’ prices — the pace of increase of the former speeded up to 4.4% y/y in the month, while that of the former — to 2.6% y/y in the month.
The domestic producers’ price inflation in March was driven by producers’ prices in mining, manufacturing and utilities, with the acceleration of the annual increase reflecting the speeding up pace of increase of industrial producers’ prices in manufacturing. The latter was mainly influenced by the producers’ prices of coke and refined petroleum products that increased by 9.0% y/y (after being on the contraction territory in the previous few months), by the higher by 5.8% y/y producers’ prices of chemicals (accelerating from 5.4% y/y increase in February), by 3.7% y/y higher producers’ prices of transport equipment (speeding up from 1.6% y/y increase in February), by 2.6% y/y higher prices of food and beverages (up from 2.0% y/y growth in February), by 2.3% y/y higher prices of machinery and equipment (up from 1.0% y/y growth the previous month), among others. The resumption of the growth of industrial producers’ prices of coke and refined petroleum products is not surprising given global oil price developments (the price of crude oil increased by 4.5% m/m in March). At the same time, the decreasing industrial producers’ prices of electrical equipment (by 2.4% y/y) and of other manufacture (by 1.3% y/y), prevented a stronger acceleration of the industrial producers’ prices in manufacturing in the month. The industrial producers’ prices in the utilities sector continue to be distorted by the lower comparison base as the network industry regulator URSO raised the regulated prices of electricity, gas, heat, water as of January.
Going forward, potentially higher prices of main raw materials following the US hiking its custom duties and the potential start of a global trade war are likely to continue to support PPI inflation in the next months. The renewed growth of global oil prices seen thus far this year and the decision of OPEC countries to cut crude oil production to support prices are also to result in PPI inflation acceleration. Utilities prices are also to have an upward impact this year as in early-December 2018 URSO announced that the price of electricity is to increase by up to 5.6% on average as of January, of gas – by up to 5.67% on average, of heat — by up to 4.7%, while of water and sewage — by up to 1.7%.
In the meantime, agricultural producers’ prices increased by 1.4% y/y in March, for the second consecutive month), but at a slower pace than that reported in February (1.8% y/y), to reflect the increasing at somewhat slower pace crops prices coupled with the moderation of animal prices’ annual fall.