Page 19 - GEORptNov18

4.2.2 PPI dynamic
Georgia’s PPI for industrial products up 6.6% y/y in Aug consolidate disinflationary trend
Georgia’s Producer Price Index (PPI) for industrial products increased by 6.6% y/y in August while the 12-month rolling average price decelerated to 8.8% y/y from 9.1% y/y one month earlier, the statistics office informed on September 21.
The rise in food, metal and energy prices contributed the most to the prices’ dynamics, by 2.0pp, 1.36pp and 1.91pp respectively. The average production price of food increased by 5.4% y/y while the price of metal (and metal products) rose by 9.8% y/y and the price of energy (electricity, natural gas, heat) by 14.1% y/y.
The industrial price figures consolidate the disinflationary trend (the consumer price inflation stagnates around the 3% y/y target level) justifying central bank’s decision of maintaining the monetary policy interest rate at 7% and considering ways to lower it in the future. Nonetheless, higher energy and food prices might pass through to consumer prices posing inflationary pressures. The import prices rose by 12.1% y/y accelerating from 10.9% y/y in July on a longer-term upward trend.
According to the NBG estimates expressed on the occasion of the latest monetary policy board on September 6, there still is the necessity of gradual exit from tight monetary policy, although how this process will be carried out depends on the magnitude of external risks. The Monetary Policy Committee is to hold its next meeting on October 24, when a rate cut is technically possible given the hawkish rate at this moment but not necessarily given the still significant uncertainties related to the global energy prices and internal inflationary pressures.
19 GEORGIA Country Report November 2018 www.intellinews.com