Production inflation continues to rise

by   CIJ News iDesk III
2021-09-16   10:57

Prices in industry also increased significantly in August. On average, they increased by 1.2% month-on-month, and are already 9.3% higher year-on-year. In the manufacturing industry - which is the largest domestic industry - product prices are even 11.3% higher than in the same period last year.

What to look for behind this rise in production inflation is not that complicated. Just look at the fastest rising products and it is clear that manufacturing companies are responding to rapidly rising input prices, especially commodities such as iron, steel, wood, oil , etc. Therefore, the prices of iron and iron products, chemical products, are rising sharply. paper and wood industry . Food industry, which has not yet reacted much to the growth of agricultural production prices, has so far increased its prices by an average of 1.5%. So far, it is making the automotive industry cheaper , especially when it comes to parts.

Another unpleasant news is the increase in prices in construction . Not only are the construction works themselves more expensive (+ 6.6%), but especially building materials (+ 16%). This development raises the question of whether it will be possible to implement contracts contracted in previous quarters, and thus under different price conditions. For construction companies, such projects can be virtually unprofitable.

Producer inflation is also a harbinger of rising consumer goods prices, which may come in the coming months. Manufacturers are under pressure from rising costs and dysfunctional international logistics, so it is possible to continue - a year and a half after the start of the pandemic - to talk about a negative supply shock in times of growing demand. And the manufacturer expects an increase in energy prices in the coming months.

Production inflation, which is subsequently reflected in the consumer, is undoubtedly a negative side effect of the current economy. However, its causes lie primarily outside the territory of the Czech Republic, which is due to its openness sensitive to developments in international markets. Inflationary pressures can only ease once the situation in commodity markets has stabilized and international trade has reached pre-precondition conditions.

Author: Petr Dufek - ČSOB