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Producers Price Index: June 2010 quarter
Embargoed until 10:45am  –  19 August 2010
Commentary

Revisions

Please note that revisions have been made to some historical producers price index (PPI) industry group time series. For more information please refer to the revisions section at the end of this commentary.

Outputs

The output prices for all industries in the PPI rose 1.1 percent in the June 2010 quarter, following a 1.8 percent rise in the March 2010 quarter and a 0.1 percent fall in the December 2009 quarter.

Producers price index outputs
All industries
Quarter Percentage change from previous quarter Percentage change from same quarter, previous year
Jun 2008
Sep 2008
Dec 2008 
Mar 2009
Jun 2009 
Sep 2009
Dec 2009 
Mar 2010 
Jun 2010
3.5
2.8
1.4
-1.4
-0.7
-1.4
-0.1
1.8
1.1
8.5
9.8
9.9
6.5
2.1
-2.1
-3.6
-0.5
1.3

 

Dairy product manufacturing prices made the most significant upward contribution to output prices, rising 5.5 percent in the June 2010 quarter. This was followed by livestock and cropping farming (up 6.0 percent), wholesale trade (up 1.4 percent), and meat and meat product manufacturing (up 4.3 percent).

 Graph, Producers price index, outputs index – selected industries.

The dairy product manufacturing index rose 5.5 percent in the June 2010 quarter, following rises of 29.6 percent in the March 2010 quarter and 5.4 percent in the December 2009 quarter. Higher prices for exported dairy products such as wholemilk powder, cheese, and butter contributed to the rise in the latest quarter.

In the year to the June 2010 quarter, the dairy product manufacturing index rose 28.4 percent, which is the largest annual increase since the December 2008 quarter. The latest annual rise follows a 29.6 percent fall in the year to the June 2009 quarter and a 41.0 percent rise in the year to the June 2008 quarter.

Graph, Producers price index, outputs index, dairy product manufacturing, annual change.  

The livestock and cropping farming index (up 6.0 percent) made the second most significant upward contribution to output prices in the June 2010 quarter, following a 3.3 percent rise in the March 2010 quarter and a 4.6 percent fall in the December 2009 quarter. Higher prices for cattle and lamb were the main reasons cited by respondents.  

In the year to the June 2010 quarter the livestock and cropping farming index rose 3.6 percent, following rises of 13.6 percent in the year to the June 2009 quarter and 8.9 percent in the year to the June 2008 quarter.

 Graph, Producers price index, outputs index, livestock and cropping farming, annual change.

The wholesale trade index (up 1.4 percent) made the third-largest contribution to increases in output prices in the June 2010 quarter, following a 1.6 percent rise in the March 2010 quarter and a 0.1 percent fall in the December 2009 quarter. The major contributor to the rise in wholesale trade prices came from higher diesel and petrol prices in the mineral, metal, and chemical wholesaling sub-index.

For the year to the June 2010 quarter the wholesale trade index rose 2.1 percent, following a 4.5 percent fall in the year to the June 2009 quarter and a 13.8 percent rise in the year to the June 2008 quarter.

The meat and meat product manufacturing index rose 4.3 percent in the June 2010 quarter, following a 4.9 percent rise in the March 2010 quarter and an 8.5 percent fall in the December 2009 quarter. Higher export prices for beef (which contributed about three-quarters of the rise) and lamb (which contributed about one-ninth) were the main reasons for the latest rise.

For the year to the June 2010 quarter the meat and meat product manufacturing index fell 0.2 percent. The latest annual fall follows rises of 4.6 percent in the year to the June 2009 quarter and 16.1 percent in the year to the June 2008 quarter.

Together, the dairy product manufacturing, livestock and cropping farming, wholesale trade, and meat and meat product manufacturing indexes contributed 59 percent of the overall 1.1 percent increase in the outputs index.

The major offsetting influence to output prices came from the petroleum, coal, and basic chemical manufacturing index (down 6.7 percent) and the finance index (down 3.2 percent). Lower petroleum refining fees was the main reason for the fall in petroleum, coal, and basic chemical manufacturing prices.

In the year to the June 2010 quarter output prices rose 1.3 percent. The latest annual rise follows rises of 2.1 percent in the year to the June 2009 quarter and 8.5 percent in the year to the June 2008 quarter.

Graph, Producers price index, outputs index – all industries, annual change.  

Inputs

Input prices for all industries in the PPI rose 1.4 percent in the June 2010 quarter. This follows rises of 1.3 percent in the March 2010 quarter, and 0.4 percent in the December 2009 quarter.

Producers price index inputs
All industries
Quarter Percentage change from previous quarter Percentage change from same quarter, previous year
Jun 2008
Sep 2008
Dec 2008 
Mar 2009 
Jun 2009 
Sep 2009
Dec 2009 
Mar 2010 
Jun 2010
6.0
3.7
-2.2
-2.5
0.0
-1.1
0.4
1.3
1.4
12.3
13.6
9.7
4.7
-1.2
-5.8
-3.2
0.6
2.0

 

The major contributor to the rise in the inputs index was the wholesale trade index (up 3.0 percent). This follows a 1.8 percent rise in the March 2010 quarter, and a 0.9 percent fall in the December 2009 quarter. Higher prices for gas condensate and imported crude oil in the mineral, metal, and chemical wholesaling sub-index were the main contributors to the latest rise. 

On an annual basis the wholesale trade index rose 9.7 percent in the year to the June 2010 quarter. This compares with a 16.5 percent fall in the year to the June 2009 quarter, and a 20.1 percent rise in the year to the June 2008 quarter.

The meat and meat product manufacturing index (up 8.5 percent) was the second-largest contributor to the rise in the inputs index in the June 2010 quarter. This follows two consecutive decreases of 0.6 percent and 9.3 percent in the March 2010 quarter and the December 2009 quarter, respectively. The latest rise was the largest since a 22.3 percent rise in the September 2008 quarter. Higher prices for cattle and lamb, partly due to supply shortages caused by drought conditions in some regions, strongly influenced the latest rise in the meat and meat product manufacturing index.

On an annual basis, the meat and meat product manufacturing index fell 1.5 percent in the year to the June 2010 quarter, compared with rises of 16.9 percent and 11.4 percent in the years to the June 2009 and June 2008 quarters, respectively.

 Graph, Producers price index, inputs index – wholesale trade and meat and meat product manufacturing.

Dairy product manufacturing prices (up 2.9 percent) made the third most significant upward contribution to the inputs index in the June 2010 quarter. This follows rises of 6.5 percent in the March 2010 quarter and 18.2 percent in the December 2009 quarter. The rise in the latest quarter mainly reflected higher farm-gate milk prices.

A new method for measuring change in farm-gate milk prices was introduced in the December 2009 quarter. The method involves taking the most recently published figure for the forecast final milk payout (at the time the indexes are compiled, one month after the reference quarter), and showing movements in this figure on a quarterly basis. The June 2010 quarter PPI spans both the 2009/10 and the 2010/11 milk seasons because the 2009/10 milk season ended on 31 May 2010. In the June 2010 quarter the change in the farm-gate milk price has been measured by taking two-thirds of the 2009/10 forecast final milk payout, and one-third of the most recently published figure for the 2010/11 forecast final milk payout. 

Together, the wholesale trade, meat and meat product manufacturing, and dairy product manufacturing indexes contributed 57 percent of the overall 1.4 percent increase in the inputs index.

The largest downward contributor to the inputs index in the June 2010 quarter came from lower electricity generation prices in the electricity generation and supply index (down 5.9 percent). The index rose 16.2 percent in the March 2010 quarter, and 6.7 percent in the December 2009 quarter. Higher lake levels, and above average inflows during the quarter were the main reasons cited for the latest fall.

On an annual basis, the electricity generation and supply index rose 7.1 percent in the year to the June 2010 quarter. This compares with a 49.5 percent fall and an 85.4 percent rise in the years to the June 2009 and June 2008 quarters, respectively.

 Graph, Producers price index, inputs index – dairy product manufacturing and electricity generation and supply.

Input prices for all industries rose 2.0 percent in the year to the June 2010 quarter, following a fall of 1.2 percent in the year to the June 2009 quarter, and a rise of 12.3 percent in the year to the June 2008 quarter.

Graph, Producers price index, inputs index – all industries, annual change.  

Commodities

Livestock

The livestock: sheep and lamb index rose 7.4 percent in the June 2010 quarter, following two consecutive falls of 2.7 percent and 12.7 percent  in the March 2010 and December 2009 quarters, respectively. Higher farm-gate prices for lamb influenced the latest rise. 

On an annual basis, livestock: sheep and lamb prices fell 6.8 percent in the year to the June 2010 quarter, compared with rises of 45.8 percent and 10.6 percent in the years to the June 2009 and June 2008 quarters, respectively.

The livestock: cattle index rose 10.6 percent in the June 2010 quarter, following a 4.3 percent rise in the March 2010 quarter and a 7.8 percent fall in the December 2009 quarter. The latest rise resulted from higher prices for prime steers due to supply shortages.

On an annual basis, the livestock: cattle index rose 7.5 percent in the year to the June 2010 quarter, compared with rises of 2.9 percent and 7.6 percent in the years to the June 2009 and June 2008 quarters, respectively.

 Graph, Producers price index, selected commodities – livestock.

Processed beef

Processed meat: beef prices rose 11.2 percent in the June 2010 quarter following a 10.1 percent rise in the March 2010 quarter and a 13.2 percent fall in the December 2009 quarter. The latest rise reflected higher prices for boneless beef exports.

On an annual basis, processed meat prices for beef rose 6.5 percent in the year to the June 2010 quarter and 1.5 percent in the year to the June 2009 quarter.

Logs and pulp

The logs for export market index rose 5.8 percent in the June 2010 quarter, following rises of 33.1 percent rise in the March 2010 quarter and 10.3 percent in the December 2009 quarter. Higher export log prices in the latest quarter reflected strong overseas demand. 

On an annual basis, the logs for export market index rose 39.5 percent in the year to the June 2010 quarter and 50.2 percent in the year to the June 2009 quarter.

The logs for domestic market index rose 7.7 percent in the June 2010 quarter, following rises of 3.5 percent in the March 2010 quarter and 2.3 percent in the December 2009 quarter. The increase in the price of domestic logs was influenced by strong demand and the effect that higher export log prices had on the domestic market.

On an annual basis, the logs for domestic market index rose 13.9 percent in the year to the June 2010 quarter, recording the highest annual increase since the year to the September 2000 quarter (up 15.5 percent).

Pulp prices rose 7.8 percent in the June 2010 quarter, following an 11.6 percent rise in the March 2010 quarter. The latest rise was driven by higher export prices for pulp.

On an annual basis, the pulp index rose 15.0 percent in the year to the June 2010 quarter, the highest annual increase since the year to the December 2008 quarter (up 19.0 percent).

 Graph, Producers price index, selected commodities – logs and pulp.

Impact of exchange rates

When calculating the PPI, prices collected on the 15th day of the middle month in the quarter are generally used to represent the entire quarter. Prices collected for imported goods are often denominated in foreign currencies. These currencies are converted to New Zealand dollars using the exchange rate at the time of pricing.

In the June 2010 quarter, the New Zealand dollar appreciated against all five major trading partner currencies, most strongly against the UK pound and the euro. The table below shows changes in the value of the New Zealand dollar in foreign currency denominations from the March 2010 quarter to the June 2010 quarter.

Exchange rates
Bank selling rates for NZ$1.00
USA
(NZ$:US$)
UK
(NZ$:pound)
Australia
(NZ$:AUS$)
Japan
(NZ$:yen)
Europe
(NZ$:euro)
15 February 2010
15 May 2010
0.6884
0.7073
0.4387
0.4835
0.7764
0.7898
61.6633
65.3447
0.5031
0.5610
Percentage change 2.7 10.2 1.7 6.0 11.5
Source: Westpac Banking Corporation
 
Graph, Producers price index, index of exchange rates.  

Revisions

Revisions have been made to PPI series for some industry groups from the December 2008 quarter to the March 2010 quarter. The revisions have been made to correct an error in the reporting and treatment of some chemical products denominated in foreign currency.

The following series are affected:

Inputs
  • Manufacturing (PPIQ.SNC)
  • Wood product mfg (PPIQ.SNC07)    
  • Petroleum, coal, and basic chemical mfg (PPIQ.SNC10)  
  • Rubber, plastics, and other chemical mfg (PPIQ.SNC11) 
  • Machinery and equipment mfg (PPIQ.SNC16)   
  • Chemicals, petroleum, and plastics (PPIQ.SNX09)  
  • Machinery and metal products (PPIQ.SNX12).
Outputs   
  • Petroleum, coal, and basic chemical mfg (PPIQ.SUC10)  
  • Chemicals, petroleum, and plastics (PPIQ.SUX09).   

There was a small impact on the PPI all industries outputs and inputs indexes for some periods, but these have not been revised as the impact was insignificant.

The 'Producers price index: March 2010 quarter – summary of revisions' table gives the originally published and revised index numbers, quarterly percentage changes, and annual percentage changes from the December 2008 quarter to the March 2010 quarter. This table is available on the Statistics NZ website (www.stats.govt.nz) with the June 2010 quarter Hot Off the Press. The revised index numbers are also available on Infoshare (under Economic indicators, Producers Price Index).

Price index developments and ANZSIC 2006 project

Statistics NZ began work in 2004 on a progressive redevelopment of the PPI. This involved re-evaluating the items that are priced and the weights that are applied to them. The remaining working-level industry output indexes have now all been redeveloped and the final ones were implemented in the March 2010 quarter.

The PPI industry inputs indexes will be redeveloped as part of a project to update the industry classification used in the PPI. Work is underway to update the 1996 Australian and New Zealand Standard Industrial Classification (ANZSIC96) with the 2006 version for the PPI. We will provide quarterly updates on progress towards implementation, which will be for the March 2011 quarter in May 2011. For more detail, please see the ANZSIC06 information page.

Pricing financial services

The output of the banking industry consists of services provided by banks and other financial intermediaries that are both explicitly and implicitly charged for. Pricing explicit services (such as bank account fees) provided by financial intermediaries is relatively straightforward. However, pricing the intermediation services provided by financial institutions that are implicitly charged for is more problematic. Due to the complex nature of these services, there are some limitations in the approach taken to measure these services. For more information, please see the Technical notes.

For technical information contact:
Lisa-Jane Thomsen or Suchindra Nanayakkara
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...
Producers Price Index: September 2010 quarter will be released on 18 November 2010.

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