Georgia's April PPI climbs at fastest rate in a decade

Georgia's April PPI climbs at fastest rate in a decade
By bne IntelIiNews May 21, 2021

Georgia's Producer Price Index (PPI) for industrial products in April rose by 3.2% m/m and 17.5% y/y, reaching the steepest annual rate seen in a decade.

The country already faces significant consumer price inflation (+7.2% y/y in April) and rising production costs incurred by companies, likely to advance further driven by trends seen on global commodities markets, are adding to other inflationary drivers. That is forcing the central bank to maintain its hawkish monetary policy, with the benchmark rate at 9.5% currently.

The annual PPI inflation rate was mainly affected by price changes in relation to several products. The production cost incurred by companies in oil and gas production rose by 2.7 times but because of the sector’s small contribution to the total, the impact was small (+0.24pp).

There were notable increases in the prices of food products (16.8% y/y, resulting in a 3.9pp impact), beverages (+7.7% y/y, +1.53pp) and basic metals (+37.7% y/y, +4.25pp). The three items accounted for more than half of the annual PPI inflation as of April.

The producer prices incurred by utility providers (electricity, gas, steam and air conditioning) rose by 19.8% y/y, contributing another significant amount (2.27pp) to the overall PPI inflation of 17.5%.