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Largest Increase In Producer Prices Since Mid-1980

Producers Price Index: September 2000 Quarter

Producers' output and input prices have both recorded their largest quarterly increases since the mid-1980s, according to the latest Producers Price Index (PPI). The September 2000 quarter figures were released by Statistics New Zealand today.

The All Industries inputs index, which measures price changes in the costs of production excluding labour and depreciation costs, rose 3.8 per cent for the September 2000 quarter. This is the largest quarterly increase recorded since the June 1985 quarter. The wholesale trade inputs index, which increased 9.8 percent in the September 2000 quarter, had the most significant impact on overall input prices. Oil companies are included in the wholesale trade industry and increases in the price of crude oil have continued to have an impact on the overall level of input prices for this industry.

The All Industries inputs index has risen for six consecutive quarters. The Producers Price Index for inputs is 10.2 per cent higher in the September 2000 quarter than in the March 1999 quarter. The PPI recorded a 171 per cent increase in the New Zealand price of crude oil over the same period.

The recent increases in input prices follow a period of little change over the previous nine years. Between the March 1990 quarter and the March 1999 quarter the PPI inputs index recorded a cumulative increase of 10.0 per cent.

Output prices rose 2.7 per cent in the September 2000 quarter. The outputs index measures changes in prices received by producers. The most significant impact on the outputs index in the September 2000 quarter came from a 13.8 per cent increase in output prices for the meat and meat product manufacturing industry. Strong international demand for beef and sheep meat and the depreciation in the New Zealand currency has lifted returns to local producers.

Assessing the flow-on effect of the latest PPI increases to future consumer prices is difficult, as not all producer prices flow into consumer inflation. This is largely because many products covered by the PPI are exported. Moreover, price movements in the Consumers Price Index are also tempered by other influences such as labour costs and the effect of competition on margins.

Ian Ewing DEPUTY GOVERNMENT STATISTICIAN

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