Producer prices hit a fresh high of 76% in May

 

• Cost of producing food rose by an eye-popping 102%, signalling prolonged higher food prices

Sri Lanka’s producer prices rose by an exponential 75.9 percent in the 12 months to May 2022, rising the most from the 52.4 percent hit in April.  

 This signals the possibility of over 70 percent consumer price inflation, which the Central Bank warned would come in the next few months. 

Producer inflation has been hitting fresh highs since the early part of this year, amid the rising global energy prices and floating of the currency, which resulted in the rupee losing about 80 percent of its value against the dollar since March.

Producer prices measure the inflation at producer level before reaching the consumer and in a hyperinflation situation, producers pass down the entire increase in their cost to the end consumer, crushing the consumer. 
Sticker prices of products now change every week or sometime daily in Sri Lanka, as pricing products has become extremely challenging.

In May, the prices of agricultural produce rose by 56.2 percent while the cost of manufacturing rose by a staggering 83.5 percent from a year ago, as the latter gets more of its inputs from imports. 

For instance, the manufacturing of textiles saw its prices rising by 137.4 percent while the manufacturing of wearing apparel rose by 46.3 percent from a year ago. 

Meanwhile, the food products manufacturing saw its costs rising by 101.8 percent while the cost of manufacturing of beverages rose by 42.3 percent.

The Central Bank last week raised interest rates by another 100 basis points to fend off any further price pressures through killing demand and thereby throwing many more millions into hunger. 

Although the Central Bank asked the Treasury to provide the poor and hungry the required assistance by way of direct cash transfers, the latter’s empty coffers cannot provide any more support.

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