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NZ producer output prices rise with dairy, power prices fan input costs

Tuesday 18th May 2010

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New Zealand producer output prices rose in the first quarter, reflecting a surge in dairy products, helping outpace an increase in input prices that was driven by high costs of electricity.  

The producers price index (PPI) outputs index rose 1.8% in the three months ended March 31, according to Statistics New Zealand data, while the PPI inputs index gained 1.3% over the same period.  

The series, which measures the prices paid for and received by farms, factories and other producers, showed dairy product manufacturing surged almost 30%, outstripping the 16% increase in input prices from electricity generation and supply. The data beat economists’ forecast, which was picking a 0.5% increase in both indices, and revised output prices up and input prices down for the December quarter.  

Rising dairy prices over the past year have underpinned record highs in the ANZ Commodity Price Index this year as Fonterra’s online trading auction showed buyers willing to pay 2008 prices to secure milk supply. The rising cost of raw materials has helped support New Zealand’s economic revival and central bank Governor Alan Bollard has indicated the nation’s trading partners faster-than-expected recovery had filtered through to its export market.  

Along with the strong dairy story, output prices were bolstered by a 1.6% increase in the wholesale trade index due to higher petrol prices. The output index fell 0.5% when compared to the same period a year earlier.  

The increase in farm-gate milk prices was the second biggest contributor to input costs rising, with the dairy manufacturing index up 6.5%.

The surge in electricity prices was put down to low lake levels, spot market conditions and strong demand, the government department said. Input prices rose 0.6% compared to the March quarter in 2009.  

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