Capital Goods Price Index: June 2008 quarter

Capital Goods Price Index

Note: Revisions have been made to some historical Capital Goods Price Index (CGPI) data. For more information please refer to Revisions at the end of this commentary.

The Capital Goods Price Index (CGPI) rose 1.0 percent in the June 2008 quarter, the largest increase since a rise of 1.2 percent in the September 2006 quarter. The latest rise follows increases of 0.5 percent in the March 2008 quarter, and 0.8 percent in the December 2007 quarter.

All six asset groups in the CGPI increased in the June 2008 quarter. The most significant upward contribution to the CGPI was from the plant, machinery and equipment index, which rose 1.5 percent. Further positive contributions came from the residential buildings index (up 0.8 percent), the other construction index (up 1.5 percent), the non-residential buildings index (up 0.6 percent), the land improvement index (up 3.8 percent), and the transport equipment index (up 0.4 percent).

The following table shows the amount that each asset group contributed to the All Group CGPI movement from the March 2008 quarter to the June 2008 quarter.

On an annual basis, the CGPI rose 3.1 percent from the June 2007 quarter to the June 2008 quarter. This follows increases of 2.8 percent in the year to the June 2007 quarter, and 3.5 percent in the year to the June 2006 quarter.

Plant, machinery and equipment

The plant, machinery and equipment index rose 1.5 percent in the June 2008 quarter. This was the most significant upward contribution to the CGPI, and the largest increase since the December 2000 quarter. The latest rise compares with a 0.1 percent fall in the March 2008 quarter, and a 0.6 percent rise in the December 2007 quarter. The rise in the plant, machinery and equipment index in the June 2008 quarter was mainly driven by higher prices for printing machinery and parts (due to higher suppliers’ prices and depreciation of the New Zealand dollar, as cited by respondents), and higher suppliers’ prices in components for agricultural and forestry equipment.

 In the year to the June 2008 quarter, the plant, machinery and equipment index rose 2.2 percent, following annual rises of 1.1 percent in the year to the June 2007 quarter, and 1.5 percent in the year to the June 2006 quarter.

Residential buildings

In the June 2008 quarter, the residential buildings index increased 0.8 percent and was the second most significant positive contributor to the CGPI. This was the smallest increase since a 0.7 percent rise in the September 2002 quarter. The main driver for the latest increase was the construction of new houses.

The same survey data used to measure the purchase and construction of new dwellings in the Consumers Price Index is used in the residential buildings index in the CGPI. This information is supplemented with additional data from the Producers Price Index, collected through the Commodity Price Survey. The most common reason cited by respondents for the increase in the June 2008 quarter was higher prices for construction components.

In the year to the June 2008 quarter, the residential building index rose 4.4 percent, which was the smallest annual increase since the year to the September 2003 quarter. The latest annual rise compares with annual increases of 5.1 percent to the June 2007 quarter, and 4.9 percent to the June 2006 quarter.

Other construction

The other (non-building) construction index rose 1.5 percent in the June 2008 quarter, following rises of 0.7 percent and 1.2 percent in the March 2008 and the December 2007 quarters, respectively. The major contributors to the latest rise in the index were higher raw material costs for pipes in construction of urban drainage and sewerage systems, and increases in suppliers' prices in components for telecommunication works.

In the year to the June 2008 quarter, the other construction index rose 4.9 percent. This follows increases of 3.1 percent and 5.8 percent in the years to the June 2007 and 2006 quarters, respectively.

Non-residential buildings

The non-residential buildings index rose 0.6 percent in the June 2008 quarter, which follows rises of 1.0 percent in the March 2008 quarter, and 0.7 percent in the December 2007 quarter. The latest rise was influenced by higher prices for reinforcing steel products, and increased costs for structural steelwork in the construction of shops and offices, and of warehouses and factories.

Annually, the non-residential buildings index rose 2.8 percent for the year to the June 2008 quarter. This compares with rises of 3.1 percent in the year to the June 2007 quarter, and 5.4 percent in the year to the June 2006 quarter.

Land improvement

In the June 2008 quarter, the land improvement index rose 3.8 percent, the largest increase since the series began in the December 1989 quarter. Increased supplier’s prices in chemicals for land clearing, and in wire for fencing, were the main drivers for the latest increase.

In the year to the June 2008 quarter, the land improvement index rose 10.9 percent, which was the largest annual increase since the series began. The latest annual rise compares with increases of 4.8 percent and 3.9 percent in the years to the June 2007 and June 2006 quarters, respectively.

Transport equipment

The transport equipment index rose 0.4 percent in the June 2008 quarter, mainly driven by higher prices for commercial vehicles greater than 3500kg and imported buses. The June 2008 quarter’s increase was the first since the September 2006 quarter.

In the year to the June 2008 quarter, the transport equipment index fell 0.1 percent. This follows falls of 0.4 percent and 0.8 percent in the years to the June 2007 and 2006 quarters, respectively.

Impact of exchange rates

When calculating the CGPI, prices collected on the fifteenth day of the middle month in the quarter are generally used to represent the entire quarter. Prices collected for imported goods are often denominated in foreign currencies. These are converted to New Zealand dollars using the exchange rates at the time of pricing.

The New Zealand dollar depreciated against the currencies of the country's five major trading partners in the June 2008 quarter. The table below shows changes in the value of the New Zealand dollar, in foreign currency denominations, from the March 2008 quarter to the June 2008 quarter.

Revisions

During the processing of the CGPI for the June 2008 quarter errors were identified, which have led to the revision of two published series. These errors occurred in the treatment of a few prices that are denominated in foreign currencies. As a result, the following two series were revised. The first series has been revised from the December 1999 quarter onwards, and the second has been revised in the March 2008 quarter only. At higher levels of aggregation, there was no impact.

• Machinery for textile, apparel and leather production (CEPQ.S2446)
• Optical instruments and photographic equipment (CEPQ.S2483)

Please note that the tables included in this release only show data from the last two years. If you require data relating to earlier periods, please email info@stats.govt.nz

For technical information contact: 
Stephanie Ye or Mark Gordon
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...

Capital Goods Price Index: September 2008 quarter will be released on 19 November 2008.