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Business Reporter
PRODUCER prices rose moderately in January across the country’s key sectors — industry and agriculture, but would not stop overall monthly inflation from taking a huge dip.
The cost build-up from producers may ultimately manifest in the final price consumers pay.
This comes against an overal price slowdown, which has started to offer some optimism about the potential for sustained price reductions.
Zimbabwe’s monthly inflation rate took a marked downturn in February, dropping 10 percentage points to 0,5 percent, reflecting progress towards durable economic stability across both local and foreign prices.
According to latest data, the ZiG month-on-month inflation rate fell significantly, complemented by a nearly similar downward trend in the US dollar (USD) inflation rate.
Consequently, the developments resulted in a decline in the weighted inflation rate, reinforcing hopes of a more predictable economic environment going forward.
The month-on-month inflation rate dropped to 0,5 percent in February, a sharp decline from the 10,5 percent recorded in January.
While the annual inflation rate remains somewhat elevated, the sharp month-on-month decline in February signals a positive trajectory for price stability.
In the long run, the monthly inflation determines the inflation trajectory, meaning the monthly drop in February should eventually lead to a lower annual rate.
Notably, producer prices may rise while inflation measured by the Consumer Price Index (CPI) falls if the increase in producer costs is absorbed by businesses.
Similarly, the PPI index may surge, as overall rate of price increase trends down, if the goods or services that see the PPI increase are not part of the CPI basket
According to the Zimbabwe National Statistics Agency (ZimStat), the Producer Price Index (PPI), excluding agriculture, stood at 105.50 in January 2025, from 103.31 in December 2024.
The PPI measures the average change in the cost of production incurred by producers, a key indicator of inflationary trends at the production level.
The rise in producer prices within the industrial sector was slightly lower than the 2,3 percent increase recorded in December 2024, suggesting a marginal easing of short-term cost pressures.
However, on an annualised basis, the PPI registered a 13,4 percent increase, indicating that businesses are still grappling with elevated costs.
“This signals that while short-term price escalations are moderating, businesses are still facing elevated input costs,” said economist Gladys Shumbambiri-Mutsopotsi.
The industries most affected include food manufacturing, metalworking, mining, and steel production, while sectors such as chemicals, furniture, and jewelry experienced little to no movement in prices.
Prices in the domestic currency also increased.
The ZiG PPI excluding agriculture rose to 209,98 in January 2025 from 203,91 in December 2024, reflecting a 3 percent month-on-month increase.
“While businesses in Zimbabwe increasingly price in US dollars to hedge against currency volatility, those operating primarily in ZiG face higher relative inflation due to exchange rate dynamics and input cost fluctuations,” explained industrial economist Julius Nyakupinda.
Despite the pressures, the weighted PPI, which combines US dollar and ZiG price indices, increased by 2,4 percent month on month, a decline from the 3,1 percent rise recorded in December 2024.
This suggests that overall inflationary pressures may be moderating.
The agricultural sector experienced higher price increases in January, with the US dollar Producer Price Index for Agriculture (PPIA) climbing to 108,59 points from 104.38 in December 2024, reflecting a 4,0 percent month-on-month rise.
The Producer Price Index for Agriculture (PPIA) measures price changes for agricultural goods at the producer level, helping businesses, policymakers, and investors assess inflationary trends within the sector.
“The month-on-month rate of change in January 2025 was 4 percent, gaining 3,1 percentage points on the December 2024 rate of 0,9 percent,” ZimStats reported.
A more significant increase was seen in the PPIA for ZiG, which surged by 9,8 percent month-on-month, reaching 210.11 in January from 191.35 in December.
The Weighted PPIA, which aggregates price changes in both currencies, stood at 131.19 in January, up from 124.19 in December, reflecting a 5,6 percent increase.
Agricultural economist Mr Daniel Hwata attributed these price increases to rising input costs, seasonal demand, and exchange rate fluctuations.
“The increase in producer prices is partly due to the rising cost of inputs such as fertilisers and fuel. Additionally, fluctuations in currency values have played a role in pricing decisions by producers,” Mr Hwata said.
Despite the sharp monthly increase, the US dollar PPIA showed a year-on-year decline of 1,1 percent in January 2025, indicating that inflationary pressures within the sector may be easing compared to the previous year.
“While short-term price pressures are evident, the overall annual trend suggests some easing cost pressures compared to January 2024,” Mr Hwata added.
As local manufacturers and farmers navigate the inflationary trends, there are indications that price increases, while still present, may continue to slow down.
The moderation in weighted PPI and the annual decline in US dollar agricultural producer prices suggest that inflationary pressures could be stabilising.
Mr Nyakupinda emphasised the importance of economic policy in maintaining this inflation trend.
“Monetary stability, improved industrial productivity, and targeted interventions in key sectors will be crucial to moderating cost pressures,” he said.
With producer prices continuing to rise at a slightly slower pace, businesses and policymakers will need to remain vigilant in managing inflationary pressures.
Whether these cost movements translate into higher consumer prices will depend on the stability of the local currency, global commodity trends, and the effectiveness of inflation control measures.
Online Reporter