Producers Price Index: March 2010 quarter

Outputs

Output prices for all industries in the PPI rose 1.8 percent in the March 2010 quarter, following four consecutive quarterly falls.

The increase for the latest quarter compared with falls of 0.1 percent and 1.4 percent in the December and September 2009 quarters, respectively. The dairy product manufacturing index was the major contributor to the rise in the March 2010 quarter.

The dairy product manufacturing index rose 29.6 percent in the March 2010 quarter, the largest since the series began in the June 1994 quarter. This follows a 5.4 percent rise in the December 2009 quarter, and a 10.9 percent fall in the September 2009 quarter. The increase in the latest quarter reflected higher prices for exported dairy products such as milk powder, cheese, and butter. In the year to the March 2010 quarter, the dairy product manufacturing index fell 2.5 percent. This compares with a 12.4 percent fall in the year to the March 2009 quarter, and a 50.4 percent rise in the year to the March 2008 quarter.

The wholesale trade index, the second largest contributor to the increase in output prices, rose 1.6 percent in the March 2010 quarter. This rise follows five consecutive quarterly falls since the December 2008 quarter, with 0.1 percent and 0.8 percent falls in the December and September 2009 quarters, respectively. The main contributor to the rise in the latest quarter came from the mineral, metal, and chemical wholesaling index, reflecting higher prices for petrol. Some offsetting impact to the overall rise in the wholesale trade index came from falls in the prices of machinery, jewellery, and other fabricated metal products. 

On an annual basis, the wholesale trade index fell 0.4 percent in the year to the March 2010 quarter compared with rises of 2.3 percent and 8.9 percent in the years to the March 2009 and March 2008 quarters, respectively.

The electricity generation and supply index (up 4.8 percent) was the third major contributor to the rise in output prices in the March 2010 quarter. This follows falls of 2.3 percent in the December 2009 quarter and 1.0 percent in the September 2009 quarter. A sustained period of low lake levels, spot market conditions, and higher demand were the main reasons cited for the rise in electricity generation and supply prices.

On an annual basis, the electricity generation and supply index rose 12.5 percent in the year to the March 2010 quarter. This compares with a 10.1 percent fall in the year to the March 2009 quarter and an 18.7 percent rise in the year to the March 2008 quarter.

In the March 2009 quarter, the main offsetting contribution came from the finance index (down 4.2 percent). The financial intermediation charges index fell due to the New Zealand dollar interest rates for borrowing increasing slightly while the rates for lending decreased slightly. For more details, please see the end of the commentary and the 'pricing financial services' section in the Technical notes.

Together, the dairy product manufacturing, electricity generation and supply, and wholesale trade indexes contributed 68 percent of the overall 1.8 percent increase in the outputs index.

In the year to the March 2010 quarter, the PPI outputs index fell 0.5 percent, compared with rises of 6.5 percent in the year to the March 2009 quarter, and 6.1 percent in the year to the March 2008 quarter.

 

 
 

Inputs

Input prices for all industries in the PPI rose 1.3 percent in the March 2010 quarter. This follows a rise of 0.4 percent in the December 2009 quarter, and a fall of 1.1 percent in the September 2009 quarter.

 

The electricity generation and supply index made the most significant upward contribution to the inputs index in the March 2010 quarter. The index rose 16.2 percent, following a 6.7 percent rise in the December 2009 quarter and an 8.2 percent fall in the September 2009 quarter. Respondents cited a sustained period of low lake levels, spot market conditions, and higher demand as the main reasons for the rise in electricity generation and supply prices.

On an annual basis, the electricity generation and supply index rose 25.7 percent in the year to the March 2010 quarter. This follows a 31.1 percent fall and a 40.7 percent rise in the years to the March 2009 and March 2008 quarters, respectively.

The dairy product manufacturing index (up 6.5 percent) made the second most significant upward contribution to the inputs index. This follows an 18.2 percent rise in the December 2009 quarter and a 20.9 percent fall in the September 2009 quarter. The rise in the latest quarter reflected an increase in the farm-gate milk price.

A new method for measuring change in farm-gate milk prices was introduced in the December 2009 quarter. The method involves taking the most recently published figure for the forecast final milk payout (at the time the indexes are compiled, one month after the reference quarter), and showing movements in this figure on a quarterly basis.

The third most significant upward contribution came from the wholesale trade index (up 1.8 percent). This follows a fall of 0.9 percent in the December 2009 quarter, and a rise of 5.6 percent in the September 2009 quarter. This latest rise was driven by an increase in the price of imported crude oil in the mineral, metal, and chemical wholesaling sub-index.

The wholesale trade index rose 6.4 percent in the year to the March 2010 quarter. This follows an 8.9 percent fall and a 13.4 percent rise in the years to the March 2009 quarter and March 2008 quarter, respectively.

 

The agriculture, forestry, and fishing index rose 1.2 percent in the March 2010 quarter, and made the fourth largest upward contribution to the inputs index. The main drivers for the latest quarterly rise were higher prices for sheep and deer livestock, and an increase in fuel prices. Four of the seven sub-indexes are based on input types from the farm expenses price index. The complete suite of sub-indexes within the farm expenses price index are published in the March quarter of each year only. These are available as supplementary tables in this release.

The meat and meat product manufacturing index (down 0.6 percent) made the largest downward contribution to the inputs index. The latest quarterly fall follows a fall of 9.3 percent in the December 2009 quarter and a rise of 0.7 percent in the September 2009 quarter. The latest fall reflects lower prices for sheep livestock.

The meat and meat product manufacturing index fell 4.7 percent in the year to the March 2010 quarter. This annual fall follows a rise of 21.9 percent in the year to the March 2009 quarter, and a fall of 2.0 percent in the year to the March 2008 quarter.

 

Input prices for all industries rose 0.6 percent in the year to the March 2010 quarter. This follows rises of 4.7 percent in the year to the March 2009 quarter, and 7.3 percent in the year to the March 2008 quarter.

  

Commodities

In the March 2010 quarter, the New Zealand dollar depreciated against four out of five major trading partner currencies, especially the US dollar (down 6.2 percent), and the Japanese yen (down 5.7 percent) adding upward pressure to prices.

Fertilisers (down 11.8 percent) recorded the fifth consecutive quarterly fall, including 0.2 percent and 3.7 percent falls in the December and September 2009 quarters, respectively. The latest quarterly fall reflected lower prices for phosphatic fertilisers (due to lower suppliers' prices). On an annual basis, the fertiliser index fell 18.4 percent in the year to the March 2010 quarter, after rising 54.6 percent in the year to the March 2009 quarter.

 

The processed meat: beef index rose 10.1 percent in the March 2010 quarter, in contrast with a 13.2 percent fall in the December 2009 quarter. The latest quarterly rise reflected higher prices for boneless beef exports. On an annual basis, the processed meat: beef index fell 10.9 percent in the year to the March 2010 quarter, and rose 21.5 percent in the year to the March 2009 quarter.

The logs for export market index rose 33.1 percent in the latest quarter, following a 10.3 percent rise in the December 2009 quarter and a 10.2 percent fall in the September 2009 quarter. Export log prices in the latest quarter were driven by higher overseas demand and the weaker New Zealand dollar. On an annual basis, the logs for export market index recorded rises of 23.1 percent in the year to the March 2010 quarter, and 58.2 percent in the year to the March 2009 quarter.

The logs for domestic market index rose 3.5 percent in the March 2010 quarter, following a 2.3 percent rise in the December 2009 quarter and a 0.1 percent fall in the September 2009 quarter. On an annual basis, the logs for domestic market index recorded rises of 5.5 percent in the year to the March 2010 quarter, and 3.0 percent in the year to the March 2009 quarter.

The pulp index rose 11.6 percent in the March 2010 quarter, following a 0.1 percent rise in the December 2009 quarter and a 4.4 fall in the September 2009 quarter. The latest quarterly rise was driven by higher international prices and the weaker New Zealand dollar. On an annual basis, the pulp index rose 0.2 percent in the year to the March 2010 quarter, and 5.0 percent in the year to the March 2009 quarter.

 

 

 

The international sea freight index rose 3.4 percent in the March 2010 quarter (due to general rate increases and the exchange rate), compared with a 1.3 percent rise in the December 2009 quarter and a 9.3 percent fall in the September 2009 quarter. On an annual basis, the international sea freight index fell 13.6 percent in the year to the March 2010 quarter, and rose 29.6 percent in the year to the March 2009 quarter.

 

 

Impact of exchange rates

When calculating the PPI, 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 currencies are converted to New Zealand dollars using the exchange rate at the time of pricing.

In the March 2010 quarter, the New Zealand dollar depreciated against four key currencies of the country's five major trading partners, while appreciating against the euro. The table below shows changes in the value of the New Zealand dollar in foreign currency denominations from the December 2009 quarter to the March 2010 quarter.

Price index developments

Statistics NZ began work in 2004 on a progressive redevelopment of PPIs. This involves re-evaluating the items that are priced and the weights that are applied to them. The remaining redeveloped output indexes have been implemented in the March 2010 quarter. These are:

• Services to transport and storage
• Water transport
• Rubber plastics, and other chemical manufacturing
• Other manufacturing
• Telecommunication services
• Cultural and recreational services
• Personal and other services.

For more information, please see the Technical notes.

ANZSIC 2006 project update

Work is currently underway to update the 1996 Australian and New Zealand Standard Industrial Classification (ANZSIC96) with the 2006 version for the PPI. We will provide quarterly updates on progress towards implementation, which will be for the March 2011 quarter in May 2011. For more detail, please see the ANZSIC06 information page here.

Pricing financial services

The output of the banking industry consists of services provided by banks and other financial intermediaries that are both explicitly and implicitly charged for. Pricing explicit services (such as, bank account fees) provided by financial intermediaries is relatively straightforward. However, pricing the intermediation services provided by financial institutions that are implicitly charged for is more problematic. Due to the complex nature of these services, there are some limitations in the approach taken to measure these services. For more information, please see the Technical notes.

For technical information contact:
Lisa-Jane Thomsen or Suchindra Nanayakkara
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...
Producers Price Index: June 2010 quarter will be released on 19 August 2010.