NZ producer input, output prices drop in first quarter, driven by lower fuel prices

Wednesday 18th May 2016

New Zealand producer input and output prices fell in the first quarter, mainly driven by lower fuel prices and weaker output prices for sheep, beef, grain and dairy farmers.

Input prices fell 1 percent in the first quarter for an annual decline of 0.9 percent, while output prices declined 0.2 percent in the quarter for a 0.1 percent annual gain, Statistics New Zealand said.

Input prices for petroleum and coal manufacturers have more than halved since the second quarter of 2012. In the first quarter of this year, their input prices fell 22 percent and their output prices dropped 18 percent, which the government statistician said was mainly influenced by lower crude oil, petrol and diesel prices. Lower fuel prices also led to a 0.3 percent decline in the farm expenses price index. Fuel has been a major element of weak inflation, with the consumer price index rising 0.2 percent in the first quarter, or 0.5 percent excluding petrol.

The business price indexes come a day after the release of the Reserve Bank's quarterly survey of expectations, which showed expectations for inflation one year out rose to 1.22 percent from 1.09 percent in the previous survey, which was the lowest reading since 1994, while the two-year ahead figure barely budged at 1.64 percent from 1.63 percent. Persistently weak inflation adds to the case for the central bank to cut the official cash rate a quarter point to 2 percent as soon as its June meeting.

Output prices for sheep, beef and grain farmers fell 8.7 percent in the first quarter, while output prices for meat manufacturers fell 4.6 percent. Dairy cattle farmers' output prices fell 6 percent, although output prices for dairy product manufacturers rose 3.4 percent.

Output prices for telecommunication, internet and library services rose 3.4 percent and inputs rose 3.2 percent, which Statistic New Zealand says followed the Commerce Commission's ruling in December on maximum wholesale broadband prices.

BusinessDesk.co.nz

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