1. Introduction 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 Gross Domestic Product (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.
Noteworthy, The Producer Price Index was launched for the first time in 2010 on a quarterly basis, and later in 2013, it was launched monthly. The following economic activities are the main components of the producer prices index basket:
1. Mining and quarrying activity; including oil and gas excavation with an 82.46% relative weight.
2. 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.
3. Electricity, gas, steam, and air conditioning supply: power plants with a 1.16% relative weight.
4. Water Supply: water desalination and purification stations, with a 0.53% 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 starts with groups from fifth to first level. Seventh and fifth levels are classified by Central product Classification (CPC.2) and from level fourth and first level 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 fourth to first level.
2. Most important features of PPI in Q2, 2024:
The Producer Price Index for Q2, 2024 reached 114.42 points, with an increase of 0.74% compared to the previous quarter (Q1, 2024), and an increased by 0.69% when compared to the corresponding quarter of the previous year (Q2, 2023).
This is due to the increase in the most important component sector of the product basket, which is the mining sector, that represents a relatively large weight with 82.46% of the total of the product basket, recorded 115.63 points, rise from the previous quarter by 0.98%, and by 0.63% from the same quarter of the previous year. The index of the manufacturing industry sector reached 107.94, affected by the increase in the prices of a number of groups during that period.
3. Comparing Q2, 2024 to Q1, 2024(Q-O-Q):
The overall PPI stood at 114.42 points, with an increase of 0.74% compared to the previous quarter (Q1, 2024), because of several changes in the prices of the four economıc sectors.
• Mining:
In Q2, 2024 the prices for this major sector increased by 0.98% compared to the previous quarter (Q1, 2024), due to a rise in oil and natural gas prices by 0.98%, while the group “Other mining and quarrying” remained steady. Given the sector’s weightage of 82.46% in the PPI basket, the overall PPI in Q2 was affected directly by the trend of it.
• Manufacturing:
The manufacturing sector showed an increase of 0.73% in the price compared to the previous quarter. This group consists of eight sub-groups, four of them recorded an increase in prices as follow: “Manufacture of rubber and plastics products” by 9.93%, followed by “Manufacture of other non-metallic mineral products” by 9.62%, "Manufacture of basic metals" by 3.27% and “Manufacture of printing and reproduction of recorded media” by 0.05%. Other groups noticed a decrease as follows: “Manufacture of beverages” by 1.34%, “Manufacture of chemicals and chemical products” by 1.11%, “Manufacture of food products" by 1.04%, and “Manufacture of coke and refined petroleum products” by 0.46%.
• Electricity, gas, steam, and air conditioning supply:
The electricity sector showed a decrease of 16.43% compared to the previous quarter due to the decrease 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 an increase by 7.26%, compared to the previous quarter, due to the increase 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 Q2, 2024 to the corresponding Quarter in 2023 (Y-o-Y):
h
Te PPI for the second quarter of 2024 increase by 0.69% compared to the corresponding quarter of 2023.
• Mining:
The prices for this sector showed an increase of 0.63% due to rise in the prices of “Crude petroleum and natural Gas" by 0.63% while a slight decrease change in “Other Mining and Quarrying” by 0.02%.
• Manufacturing:
The Manufacturing group showed an increase of 0.92% between the production prices of Q2, 2024 and the corresponding quarter of 2023, due to various positive and negative changes in the eight sub-groups products. Four sub-groups recorded an increase and the other four decreased.
Sub-groups witnessing an increase between the two quarters(Y-o-Y):
• “Manufacture of coke and refined petroleum products” by 8.22%.
• “Manufacture of other non-metallic mineral products” by 4.15%.
• “Manufacture of food products” by 3.29%.
• “Manufacture of rubber and plastics products” by 1.65%.
Sub-groups witnessing a decrease between the two quarters(Y-o-Y):
• “Manufacture of basic Metals” by 4.40%.
• “Manufacture of Beverages” by 1.37%.
• “Manufacture of chemicals and chemical products” by 0.74%.
• “Printing and reproduction of recorded media” by 0.33%.
• Electricity, gas, steam, and air conditioning supply:
The prices for this group recorded an increase of 0.44% compared with the second quarter in the previous year (2023).
• Water Supply:
The prices for this group recorded an increase of 4.25% compared with the second quarter in the previous year (2023).
