1. Introuction to Producer Price Index:
The Producer Price Index (PPI) measures average change overtime in domestic product prices. PPI is one of the key indicators used to reduce prices when estimating GDP at constant prices, where GDP is compared in a time series after excluding the impact of prices.
The Price and Indices Section also issued an updated series of producer price index, after recalculating them on the base year 2018. The change in the base year is a basic requirement due to the change in economic activities, especially the manufacturing sector, which witnessed significant changes during the previous five-year period, in addition to consensual The base year with other indexes and the national accounts indicators.
Noteworthy, The Producer Price Index was launched for the first time in 2010 on a quarterly basis, and later in 2013, it was launched on a monthly basis. The following economic activities are the main components of the producer prices index basket:
- Mining and quarrying activity ; including oil and gas excavation with a 82.46% relative weight.
- Manufacturing activity, which is produced locally, such as food industry, petroleum refining, iron and steel industry, petrochemicals and other industries; with a 15.85% relative weight.
- Electricity, gas, steam and air conditioning supply: power plants with a 1.15% relative weight.
- Water Supply: water desalination and purification stations, with a 0.52% relative weight.
- The PPI basket has been graded into seven levels, where the lowest level is the level of goods ( seventh level), then the upper level start with groups from fifth level to first level. Level seven and five classified by Central product Classification (CPC.2). from level four to level one are classified by international Standard Industrial Classification of All Economic Activities (ISIC.4). The added value of economic activities (from the national accounts section) was used to calculate the relative importance of the levels from the first to the fourth level, as it was calculated from the added value of economic.
2. Most important features of PPI in Q1, 2023:
The Producer Price Index for Q1, 2023 reached 125.57 points, with a decrease of 11.91% compared to the previous quarter (Q4, 2022), and a decrease by 8.9% when compared to the corresponding quarter of the previous year (Q1, 2022).
It is noteworthy that the Mining sector represents 82.64%, which is the largest percentage among the four main components of the producer price index after changing the base year to 2018, Thus, PPI is significantly affected by the prices of the (Crude petroleum and gas), so by reaching 127.35 points, there was direct effect of the overall PPI reaching to reach 125.57 points in Q1,2023. Manufacturing group amounted to 117.09 points due to the changes in eight groups in this period.
3. Comparing Q1, 2023 to Q4, 2022 (Q-O-Q):
The overall PPI stood at 125.57 points, with a decrease of 11.91% compared to the previous quarter (Q4, 2022), as a result of several changes in the prices of the four major groups, namely:
Mining:
In Q1, 2023 the prices for this major sector decreased by 13.38% compared to the previous quarter (Q4, 2022), due to a fall in oil and natural gas prices by 13.39%, and other mining and quarrying by 0.01%. Given the group’s weightage of 82.46% in the PPI basket, the overall PPI in Q1 was affected directly by the trend of this this sector.
Manufacturing:
The manufacturing sector showed a decrease of 4.73% in the price compared to the previous quarter. This group consists of eight sub-groups, three of them recorded a decrease in price as follow: “Manufacture of chemicals and chemical products” by 6.84%, which was the highest decreases followed by "Manufacture of basic metals" by 4.52%, and “Manufacture of coke and refined petroleum products” by 2.64%.
Other groups noticed increase as follow : “Manufacture of rubber and plastics products” by 4.55%, “Manufacture of food products" by 1.97%, “Manufacture of other non-metallic mineral products” by 1.05% and “Manufacture of beverages” by 1.02%. No change notice in “Manufacture of Printing and reproduction of recorded media”.
Electricity, gas, steam and air conditioning supply:
The electricity sector showed an increase by 13.67% compared to the previous quarter due to the increase occurred in electricity production prices. In given the group’s slight weightage in the basket, it had a little impact on the overall PPI.
Water Supply:
The water sector showed a decrease by 1.05%, compared to the previous quarter due to the decrease occurred in water production prices. In given the group’s slight weightage in the basket, it had a little impact on the overall PPI.
4. Comparing Q1, 2023 to the corresponding Quarter in 2022 (Y-o-Y):
The PPI for the first quarter of 2023 decrease by 8.90% compared to the corresponding quarter of 2022. However, there was a variation in change percentages in the PPI major groups.
Mining:
The prices for this major group showed a decrease of 7.34% due to a decrease in prices of the "Crude petroleum and natural Gas" by 7.35%.
Manufacturing:
The Manufacturing group showed a decrease of 17.76% between the production prices of Q1, 2023 and the corresponding quarter of 2022, due to various positive and negative changes in the eight sub-groups products. Three sub-groups recorded a decrease and the other five were increased.
Sub-groups witnessing a decrease between the two quarters(Y-o-Y):
•“Manufacture of chemicals and chemical products” by 25.66%.
•“Manufacture of basic Metals” by 11.39%.
•“Manufacture of coke and refined petroleum products” by 3.72%.
Sub-groups witnessing an increase between the two quarters(Y-o-Y):
•“Printing and reproduction of recorded media” by 9.53%.
•“Manufacture of food products” by 5.96%.
•“Manufacture of rubber and plastics products” by 4.44%.
•“Manufacture of Beverages” by 1.15%.
•“Manufacture of other non-metallic mineral products” by 0.44%.
Electricity, gas, steam and air conditioning supply:
The prices for this group recorded an increase of 2.34% compared with the quarter one in the previous year (2022)
Water Supply:
The prices for this group recorded an increase of 4.2% compared with the quarter one in the previous year (2022).
For more information
click here
