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Producers Price Index: June 2001 quarter

Producer Prices Rise

Prices paid and received by New Zealand producers both rose in the June 2001 quarter, according to Statistics New Zealand's Producers Price Index (PPI). This follows decreases in both the inputs and outputs indexes in the March 2001 quarter. Both indexes rose for the seven consecutive quarters between March 1999 and December 2000. However, this followed five years of relative price stability.

The PPI outputs index, which measures changes in the prices received by producers, rose 1.3 per cent in the June 2001 quarter. Output prices are now 6.1 per cent higher than in the June 2000 quarter.

Nearly 30 per cent of the outputs index increase in the June 2001 quarter is attributable to an increase in prices in the agriculture sector. The livestock and cropping farming outputs index rose 7.8 per cent, primarily reflecting higher livestock prices paid to farmers by meat companies. A 6.9 per cent increase in the meat and meat product manufacturing outputs index, which was driven by higher prices for export beef and sheep meat, was also a significant contributor to the increase.

The PPI inputs index, which measures changes in the prices of inputs to production, rose 1.4 per cent in the June 2001 quarter. Input prices are now 8.1 per cent higher than in the June 2000 quarter.

A 4.3 per cent increase in the wholesale trade inputs index, which was driven by higher prices for crude oil, was the most significant contributor to the overall increase in the inputs index. The meat and meat product manufacturing inputs index, which rose 8.1 per cent also made a significant contribution. This was primarily a result of higher prices paid by meat companies for livestock.

Price increases in electricity generation and supply made it the third most significant contributor to the increases in both the inputs and outputs indexes. The electricity generation and supply outputs index rose 8.1 per cent and the inputs index rose 10.7 per cent. These rises were predominantly driven by higher prices paid by electricity retailers to the generators.

Assessing the flow-on effect of the latest PPI increases to future consumer prices is difficult, as not all producer price changes flow into consumer inflation, due to the export of many of the products covered by the PPI.

Brian Pink
Government Statistician

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