Costs for industry keep climbing in five-month continuous rise

Costs for Maltese industry have continued to rise in December 2021, with latest data from the National Statistics Office confirming the trend of rising importation costs in the post-pandemic era.

The latest data from December shows the industrial producer price index again registering a steep increase of 7.15% over the same period in 2020. The trend continues as a series of month-on-month cost increases from August onwards.

Malta’s industrial price index monitors the selling prices of leading products from a sample of 80 large enterprises: in August, industrial prices for intermediate goods, which are used to manufacture final consumer products, shot up by a massive 8% over the same month in 2020; then 9.6% in September and 9% in October.

The highest increase in December now was due to intermediate goods (11.1%).

Higher supply costs from shipping and supply problems keeping costs high has been a global problem throughout the COVID-19 pandemic – the dislocation of supply could not keep up with the renewed demand as the pandemic subsided.

The rise in costs for industry is then mirrored by a decrease in industrial production: compared to December 2020, working-day industrial production fell by 6.6%. The largest decrease was registered in the production of consumer goods (17.3%), followed by intermediate goods (11%). The production of energy and capital goods increased by 14.2% and 2% respectively.

It is unclear whether the European Commission forecasts of the past week represent the calm before the storm: relative to the EU average, inflation in Malta has increased only moderately in 2021, registering the lowest rate of inflation in the EU at 2.1%, half the European average of 3.9%.

A factor in this is that the Maltese authorities are committed to limit energy prices growth in 2022 with a multi-million outlay to cushion any increases in electricity production costs from the rise in gas prices.

Malta buys its gas from the Azerbaijani state-owned Socar Trading, which is a part-owner of the Electrogas gas plant. But in the rest of Europe, as tensions with Russia rise, energy prices are now expected to remain elevated for longer.

Brussels says the combination of rising energy prices, and the supply-chain disruptions will keep up the inflationary pressure until summer.