Producer inflation up again

Annual producer price inflation for March inched up 1.1 percentage points to 23.39% from a revised February figure of 22.29%, according to an official release from the Ghana Statistical Service.

The increase was the fourth in consecutive months since the index resumed its ascent in December last year, and the rate was the highest in the 12-month period to March 2011.

The high annual rate of increase in prices received by domestic producers continues to reflect the substantial year-on-year impact of utility prices, which were hiked sharply in June 2010 following demands by producers in the sector for price-adjustments.

Producer inflation in the utilities sector was 71.96% year-on-year, though the increase between February and March was a marginal 0.01%. Mining and quarrying recorded inflation of 32.27%, while manufacturing inflation was a lower 11.61%.

Government Statistician, Dr. Grace Bediako, disclosed that the highest monthly inflation of 4.83% was recorded in the mining and quarrying sector due mainly to higher prices for gold. The month-on-month rate for all industries was 0.91%, she said.

Compared to February, this was a lower monthly increase, and given the considerably lopsided effect of utility prices on the index, the increasing annual rate of producer price inflation may not portend a similar trajectory for consumer inflation in the coming months.

March consumer inflation dipped marginally to 9.13% as stable food prices helped turn the tide of increases that had been occasioned by January’s petroleum price revisions.

Yet, as a cost-of-doing-business indicator, the persistently double-digit producer inflation figures support long-standing concerns within industry about a costly business environment as domestic producers contend with cheap imports, high financing costs and currency risks that threaten the stability of raw-material prices.

As most analysts expect the Bank of Ghana’s benchmark interest rate to hold steady at 13.5% when its rate-setting committee meets next month, a lot would depend now on banks to relax their lending rates as the macro-economy consolidates its stability and with the banking sector riding out the storm of bad debts that inflicted their balance-sheets for the most part of 2008-2010.

Amid the tight credit regime that followed the macro-economic difficulties of 2008, most enterprises incurred high financing costs in their attempts to borrow to support cash flows and expand operations.

Currency risks remain with the cedi trading particularly weakly since the year began. Generally, the cedi has been shedding value against the dollar so far this year, and any substantial slips could hurt breweries and some consumer-goods producers who rely on imports to build their raw-material stocks.

The outlook for producer prices is for utilities to maintain their lingering year-on-year effects until June when a stronger base will likely soften their impact.


Manufacturing inflation: key highlightsManufacturing inflation, with the largest weight of 69.75% in the index’s computation, rose to 11.61% in March from 11.16% in February.

Publishers recorded the highest inflation among manufacturers with an annual increase of 35.64%, followed by manufacturers of electrical machinery and apparatus, whose prices went up by 34.81%.

Consumer-goods manufacturers saw varied rates within the main sub-groups: food and beverage producers saw 9.04% inflation, compared to 8.8% in February; protein, fruit, vegetables and cooking oil producers experienced an annual decline of 0.22% in prices; and dairy-product manufacturers saw stable inflation of 13.24%.

Producer inflation for other food-product manufacturers was 27.97%, higher than the previous month’s figure of 25.63%. Textile manufacturing also saw annual inflation of 20.22%.