The annual producer price inflation reached a new record high of 65.2 percent year-on-year in October of 2022 from 45.6 percent in the previous month, partly due to a faster depreciation of the cedi.
The pace of inflation picked up as the GH cedi suffered losses against the US dollar after a wave of sovereign debt downgrades deepened the exchange rate pass-through to inflation. The cedi has lost close to 50 percent of its value, year to date, to the American greenback
The producer price index (PPI) measures the average change over time in the prices received by domestic producers for the production of their goods and services.
According to data from Ghana Statistical Services (GSS), industry – which accounts for the majority of the PPI basket – went up from 54.5 percent to 75.6 percent. In the construction sector, the rate decreased from 25.1 percent in September 2022 to 23.0 percent in October 2022, while it grew in the services sector from 5.6 percent in September 2022 to 10.0 percent in October 2022.
Impact on CPI
This increase in PPI may be a sign of what to expect in terms of consumer inflation, which has been on the rise and is projected to continue rising through October 2022 – when it will surpass the 40 percent threshold and reach 40.4 percent, the highest level since July 2001.
Producers pass on inflationary input costs to retailers, who then pass them on to consumers. This makes it simpler to anticipate future changes in the pricing of finished goods. The PPI for finished goods provides an indication of the expected CPI change.
Businesses ultimately pass on higher input costs to the customers behind them in the supply chain. As a result, the finished goods that these companies sell to retail retailers will cost more money.
Industry Producer Inflation
In comparison to the rate of 54.5 percent that was recorded in September 2022, the industrial producer inflation surged by 75.6 percent, or 21.1 percentage points. This follows a rise in the Mining and Quarrying sub-rate sectors from 57.5 percent in September 2022 to 86.4 percent in October 2022, a rise of 29 percentage points.
In October 2022, the Manufacturing subsector saw a gain of 14.9 percentage points to reach 73.1 percent. A 33.7 percent inflation rate was observed for electricity and gas in October 2022, up 10.0 percent from the rate of (23.7%) in August. The sub-sector of water supply, sewerage, and waste management saw inflation of 15.7 percent.
Services Producer Inflation
In comparison to the 5.6 percent rate recorded in September 2022, the producer price inflation rate for services jumped to 10 percent in October 2022… a 4.4 percentage point rise.
The Transport and Storage subsector’s service producer price inflation climbed from 27.3 percent in September 2022 to 71.4 percent in October 2022, a rise of 44.1 percentage points. In October 2022, the rate for the accommodation and food subsector grew by 17.2 percentage points to 42.1 percent. In October 2022, the information and communication subsector’s inflation rate was 1.4 percent, up from 0.9 percent in September 2022.
Construction Producer Inflation
Construction producer price inflation (CPPI) was 23.0 percent in September 2022, which is a 2.0 percentage point decline from the 25 percent rate that was registered in September 2022.
According to the CPPI, the inflation rate for the subsector of construction of buildings decreased from 86.6 percent in September 2022 to 77.8 percent in October 2022, a decrease of 8.8 percentage points. While the specialised construction activities sub-sector recorded a 6.0 percent inflation rate for October 2022 compared to 5.2 percent in September 2022, the rate for the civil engineering sub-sector only slightly fell by 0.5 percentage points to 5.4 percent in October 2022.
