NZ producer input prices post biggest gain in 23 years

Wednesday 19th November 2008

Prices paid by businesses for their raw materials and services had the biggest annual gain in 23 years in the third quarter on higher costs for oil, milk and meat.

Producer input prices rose about 14% in the third quarter from a year earlier, according to Statistics New Zealand. They rose 3.7% from the second quarter, slowing from a 5.6% pace in the previous three months.

Higher oil and milk prices eroded the benefit of a drop in electricity prices, reflecting higher hydro-lake levels. The cost of electricity fell 32% in the latest three months, after soaring 51% in the second quarter.

Producer output prices, the prices businesses receive, rose 2.8% in the latest quarter and were up 9.8% from a year earlier, the biggest gain in 21 years.

The price increases probably won't deter the central bank from extending its interest rate cuts next month, with prospects of an extended economic slump likely to ease inflationary pressures.

By Jonathan Underhill

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