Why is the Producer Price Index forecast to stabilise in 2022?

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Producer Price Index Forecasted to Stabilise in 2022 Due to Economic Recovery and Normalised Input Costs

The Producer Price Index (PPI) is anticipated to stabilise in 2022, a projection driven by the expected recovery of both domestic and global economies. This stabilisation is further supported by the anticipated normalisation of input costs, which had previously contributed to an increase in the PPI. During the first eight months of 2021, the PPI by local production had seen a notable increase of 8.2 per cent.
Drivers of PPI Growth in Early 2021

The surge in the PPI during the initial eight months of 2021 was primarily attributed to escalating global commodity prices. Specifically, significant increases in the costs of crude oil and natural gas played a substantial role in driving up the index. This trend reflects broader global economic conditions influencing the cost of raw materials.
Sectoral Contributions to PPI Increase

Several key sectors contributed significantly to the overall rise in the PPI during the first eight months of 2021. The agriculture, forestry, and fishing sector experienced the largest increase, with its PPI rising by 36.6 per cent. Following this, the mining sector saw a substantial increase of 30.2 per cent. The manufacturing sector also contributed to the growth, with an 4.3 per cent rise in its PPI, while the water supply sector recorded a 0.7 per cent increase.
Contrasting Sector Performance

In contrast to the general upward trend, the index for the electricity and gas supply sector experienced a decline during the same period. This sector's PPI dropped by 0.7 per cent between January and August 2021. This divergence highlights varying economic pressures and operational factors affecting different industries within the broader economy.

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Why is the Producer Price Index forecast to stabilise in 2022?

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