Producer prices show signs of easing 

Source: Producer prices show signs of easing – herald

Tapiwanashe Mangwiro

Producer prices showed signs of easing cost pressures in the nonagricultural sector in March 2025,  reflecting a somewhat mixed but ultimately positive outlook for the economy, figures from the Zimbabwe National Statistics Agency (ZimStat) show.

The ZiG Producer Price Index, excluding agriculture, dipped slightly to 211.28 in March 2025 from 211.60 in February, a month-on-month decline of 0,1 percent following a 0,8 percent rise in February.

“The month-on-month rate of change in March 2025 was –0,1 percent, shedding 0,9 percentage points on the February 2025 rate of 0.8 percent,” ZimStat reported, signalling moderating cost push inflation in manufacturing and services.

Beneath the mild headline drop, sector dynamics diverged.

Mining activity underpinned a small uptick in the weighted PPI, even as manufacturing categories from paper to beverages held steady.

“Mining and quarrying contributed to the increase of the index, while manufacturing categories from paper to beverages registered no movement,” ZimStat said.

Export-oriented firms have continued to enjoy price windfalls, compensating for softer domestic demand.

In dollar terms, the PPI remained flat at 106.38, with the month-on-month rate easing by 0,8 percentage points to zero.

However, imported inflation remains elevated, as US dollar-priced inputs climbed 13,2 percent year on year from March 2024 to March 2025, reflecting sustained external cost pressures.

“The USD Producer Price Index (PPI) excluding agriculture was 106.38 in March 2025 and 106.38 in February 2025.

The month-on-month rate of change in March 2025 was 0,0 percent, shedding 0,8 percentage points on the February 2025 rate of 0,8 percent,” the report stated.

Rudo Chikore, senior economist at R&E Consultancy, welcomed the dip but cautioned that it remains fragile.

“A –0,1 percent monthly decline in the PPI may signal a plateauing of cost-push inflation, but without sustained improvements in power supply and transport logistics, producers will struggle to convert lower input costs into price relief for consumers,” Ms Chikore said, pointing to power supply challenges at Kariba Dam and rising diesel prices as upside risks to margins.

However, generation is expected to pick up at the country’s 1050 megawatt facility, the second largest after Hwange Power Station.

Tendai Moyo of Midlands State University’s Graduate School of Business urged restraint in reading too much into one month’s data.

“Volatility in commodity prices, especially nonferrous metals, can distort short-run PPI readings.

“The fact that mining contributed to lifting the weighted PPI suggests that export-oriented firms are still enjoying price windfalls, even as domestic processors remain under strain,” she said.

Ms Moyo noted that stable readings in leather goods, plastics, and food processing indices reflect either steady input costs or limited producer pricing power.

With global base metal prices retreating from the early 2024 peak, margins in the local mining sector may narrow in the coming months, potentially subtracting from the weighted PPI, which blends ZiG and US dollar indices geometrically.

On the domestic front, the PPI data underscores the need for policy measures to bolster energy reliability and ease transport bottlenecks.

Without such interventions, any relief in producer prices may not translate into lower consumer inflation. In contrast, the Producer Price for Agriculture (PPIA) surged in March, reflecting strong post-harvest demand and rising costs for crop and animal products.

The ZiG PPIA rose to 224.00 in March from 216.35 in February, a 3,5 percent month-on-month jump versus 3,0 percent in February.

“This means that prices as measured by the all items ZiG PPIA increased by an average of 3,5 percent from February 2025 to March 2025,” ZimStat explained.

The US dollar-denominated PPIA also climbed, though less sharply, rising to 110.63 from 109.34, a 1,2 percent month-on-month increase and matching its year-on-year growth rate.

The weighted PPIA, which combines ZiG and US dollar measures, increased 1,8 percent to 135.41 from 132.96.

“The products that have contributed to the rise in the March 2025 index were crop and animal products, hunting and related services,” ZimStat noted.

Thomas Mutasa, a Harare-based agricultural economist, said higher agricultural PPIA reflects both robust seasonal demand and rising input costs.

“We are seeing strong seasonal demand for grains and animal products post-harvest, which is inflating producer prices.

However, this also reflects rising input costs, including fertilisers, transport, and veterinary services, many of which are still imported and priced in USD,” he said.

Mr Mutasa warned that without measures to contain input cost inflation, retail food prices could soon follow suit.

Chenai Dube of AgroCulture highlighted the divergence between ZiG and US dolla indices as a warning sign for monetary authorities.

“A 3,5 percent rise in ZiG terms versus just 1,2 percent in USD suggests domestic inflationary forces are outpacing global trends, a red flag for monetary authorities,” she said, adding that cost pass-through from fuel and road toll hikes is now evident at the producer level.

March’s data present a dual-edged picture.

In non-agriculture, a slight easing in producer prices offers hope that cost-push inflation may be peaking.

In agriculture, stronger prices promise improved farmer incomes but risk stoking food inflation.

For the second quarter of 2025, analysts expect the ZiG PPI to hover around the 211 mark, barring major shifts in fuel tariffs or power generation, while the USD PPI’s year-on-year climb suggests imported inflation will continue to weigh on margin recovery.