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 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, 2023
The Producer Price Index for Q2, 2023 reached 113.64 points, with a decrease of 9.50% compared to the previous quarter (Q1, 2023), and decreased by 20.021% when compared to the corresponding quarter of the previous year (Q2, 2022).
This is due to the decrease in the most important component sector of the product basket, which is the mining sector, which represents a relatively large weight, as it represented 82.64% of the total product basket, which recorded a record of 114.91, down from the previous quarter by 9.77%, and by 28.3% from the same quarter of the previous year, The index of the manufacturing industry sector reached 106.96, affected by the decrease in the prices of a number of groups during that period. Table (1) shows the index for the second quarter and the quarterly and annual comparisons for the main groups. Chart (1) shows the indices at the level of the main sectors.
3. Comparing Q2, 2023 to Q1, 2023(Q-O-Q):
The overall PPI stood at 113.64 points, with a decrease of 9.50% compared to the previous quarter (Q1, 2023), because of several changes in the prices of the four economıc sector, Table (1).
• Mining:
In Q2, 2023 the prices for this major sector decreased by 9,77% compared to the previous quarter (Q1, 2023), due to a fall in oil and natural gas prices by 9,78%, and there no change noticed with “Other mining and quarrying”, since the percentage was 0.01%. Given the sector’s weightage of 82.46% in the PPI basket, the overall PPI in Q2 was affected directly by the trend of this this sector.
• Manufacturing:
The manufacturing sector showed a decrease of 8.65% in the price compared to the previous quarter. This group consists of eight sub-groups, four of them recorded a decrease in price as follow: “Manufacture of coke and refined petroleum products” by 12.94%. “Manufacture of chemicals and chemical products” by 11.15%, "Manufacture of basic metals" by 0.69%, and “Manufacture of food products" by 0.56%. Other groups noticed increases as follows: “Manufacture of rubber and plastics products” by 4.19%, “Manufacture of beverages” by 0.16%, and “Manufacture of other non-metallic mineral products” by 0.05%. No change noticed in “Manufacture of Printing and reproduction of recorded media”.
• Electricity, gas, steam, and air conditioning supply:
The electricity sector showed a decrease of 9.04% compared to the previous quarter due to the increase 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 10.33%, compared to the previous quarter, due to the decrease 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, 2023 to the corresponding Quarter in 2022 (Y-o-Y):
The PPI for the second quarter of 2023 decrease by 28.21% compared to the corresponding quarter of 2022. However, there was a variation in percentages change in the PPI major groups, as shown in the table (1) and graph (3).
• Mining:
The prices for this sector showed a decrease of 28.26% due to a decrease in the prices of “Crude petroleum and natural Gas" by 28.29%.
• Manufacturing:
The Manufacturing group showed a decrease of 30.65% between the production prices of Q2, 2023 and the corresponding quarter of 2022, due to various positive and negative changes in the eight sub-groups products. Four sub-groups recorded a decrease and the other four increased.
Sub-groups witnessing a decrease between the two quarters(Y-o-Y):
• “Manufacture of chemicals and chemical products” by 38.03%.
• “Manufacture of coke and refined petroleum products” by 30.33%.
• “Manufacture of basic Metals” by 19.33%.
• “Manufacture of other non-metallic mineral products” by 0.39%.
Sub-groups witnessing an increase between the two quarters(Y-o-Y):
• “Manufacture of food products” by 4.79%.
• “Manufacture of rubber and plastics products” by 4.46%.
• “Manufacture of Beverages” by 1.22%.
• “Printing and reproduction of recorded media” by 0.37%.
• Electricity, gas, steam and air conditioning supply:
The prices for this group recorded an increase of 6.50% compared with the quarter two in the previous year (2022)
• Water Supply:
The prices for this group recorded an increase of 16.26% compared with the quarter two in the previous year (2022).
