Producer Prices Continue to Rise

Producers Price Index: December 2000 quarter

Producer Prices Continue to Rise

Output and input prices both increased in the December 2000 quarter, according to the Producers Price Index (PPI) released today by Statistics New Zealand. They have now increased for seven consecutive quarters. The rise in the last two quarters are the highest quarterly increases since the September 1989 quarter for outputs and the June 1985 quarter for inputs.

The PPI outputs index, which measures changes in prices received by producers, increased 2.2 per cent in the December 2000 quarter, following a 2.7 per cent rise in the September 2000 quarter. The outputs index has increased 9.4 per cent since the March 1999 quarter, after being flat for the previous five years. Over a quarter of the increase in the December 2000 quarter is attributable to increases in the wholesale trade outputs index, which increased 4.9 per cent this quarter, in part reflecting higher prices for diesel and aviation fuel.

The PPI inputs index, which measures changes in the price of inputs to production, increased 3.6 per cent in the December 2000 quarter. This followed a 3.8 per cent increase in the September 2000 quarter. The inputs index has increased 14.1 per cent since the March 1999 quarter, when oil prices started to rise.

The increase in output prices is 4.7 percentage points less than the increase in input prices over the same period. However, this does not necessarily mean a decrease in margins, as business operating costs include items, such as labour costs and depreciation, which are not covered by the PPI inputs index.

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 due to the export of many of the products covered by the PPI.

Ian Ewing DEPUTY GOVERNMENT STATISTICIAN END

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