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NZ producer input prices rise faster than output prices in second quarter on crude oil gains

Wednesday 17th August 2016

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New Zealand producer input prices rose at more than four times the pace of output prices in the second quarter, reflecting stronger prices for crude oil.

Prices received by producers rose 0.2 percent in the quarter for an annual gain of 0.5 percent, while prices paid by producers rose 0.9 percent in the quarter for an annual gain of 0.3 percent, Statistics New Zealand said. Prices paid by farmers rose 0.2 percent in the quarter and fell by 1.6 percent in the year while capital goods prices were up 0.9 percent in the latest three months for an annual increase of 3.4 percent. 

Input prices for the petroleum and coal product manufacturing industry rose 22 percent in the June quarter, due to higher international prices for crude oil, making up some ground after declines of 22 percent in each of the two preceding quarters.

"Despite the June quarterly increase in costs paid by fuel manufacturers, fuel prices have fallen by about half since mid-2012," said Sarah Williams, business prices manager at Statistics NZ.

In the August monetary policy statement, the Reserve Bank cut the official cash rate a quarter point to 2 percent and said further easing will be required to tackle stubbornly low inflation. It lowered its forecast track for inflation but still sees it lifting back to the bottom end of its 1 percent-to-3 percent target band by the fourth quarter of this year. Annual inflation was just 0.4 percent in the second quarter and has been below the target range for seven quarters.

Output prices for the electricity and gas supply industry rose 1.9 percent in the June quarter, due to higher retail electricity prices in the face of seasonal demand. Input prices for that industry fell 0.3 percent, influenced by lower electricity generation prices.

For the construction sector, both input and output prices rose 0.7 percent in the latest quarter. Output prices were influenced by higher prices for new houses, while rising input prices reflected increases for diesel, petrol and other services.

Dairy cattle farmers' output prices rose 3.1 percent in the latest quarter, influenced by higher farm-gate milk prices. Dairy product manufacturing output prices fell 6.8 percent on lower prices for milk product exports. In the year, dairy product manufacturing output prices decreased 13 percent.

Sheep, beef, and grain farmers' output prices rose 3.2 percent in the quarter, influenced by higher beef cattle prices. Output prices for meat and meat product manufacturing fell 0.2 percent, due to lower prices for exports of sheep meat.

The prices farmers paid for their inputs also rose 0.2 percent in the June quarter, influenced by higher prices for diesel.

The government statistician said it is continuing its rolling review of business price indexes. The review had two objectives: to maintain the relevance of the indexes and to collect commodity data to use in the national accounts.

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