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Producers Price Index: June 2013 quarter
Embargoed until 10:45am  –  19 August 2013
Commentary

Dairy prices lead rise in output PPI

The output producers price index (PPI), representing prices received for all goods and services produced by New Zealand's productive sector, rose 1.0 percent in the June 2013 quarter. This compares with a 0.8 percent increase in the March 2013 quarter and a 0.1 percent fall in the December 2012 quarter.

The output price index for dairy product manufacturing (up 14 percent) made the largest contribution to the rise in the output PPI. The second major contributor was dairy cattle farming (up 9.0 percent). Together, these two indexes contributed just over 90 percent of the rise in the output PPI in the June 2013 quarter.

On an annual basis, the output PPI increased 0.8 percent in the year to the June 2013 quarter. This compares with a 0.5 percent rise in the year to the June 2012 quarter and a 4.5 percent rise in the year to the June 2011 quarter.

Milk powder leads rise in dairy product manufacturing prices

The dairy product manufacturing index rose 14 percent in the June 2013 quarter, mainly due to increased export prices for milk powder. Rises in export prices for cheese and butter also contributed to the increase. The latest movement is the largest quarterly increase since the March 2010 quarter, when the index rose 30 percent.

In the year to the June 2013 quarter, the output price index for the dairy product manufacturing industry increased 7.9 percent. This compares with a 9.8 percent fall in the year to the June 2012 quarter and a 7.3 percent rise in the year to the June 2011 quarter.

 Graph, Producers price index, outputs – dairy product manufacturing, quarterly, June 2007 to June 2013.

Higher milk prices at the farm gate push up dairy cattle farming index

The second major contribution to the output PPI was the dairy cattle farming index, which rose 9.0 percent in the June 2013 quarter. This increase was influenced by higher milk prices for dairy farmers at the farm gate. 

For the year to the June 2013 quarter, the output price index for dairy cattle farming rose 7.9 percent. This compares with an 18 percent fall in the year to the June 2012 quarter and a 16 percent rise in the year to the June 2011 quarter.

Graph, Producers price index, outputs – dairy cattle farming, quarterly, June 2007 to June 2013.

Dairy product manufacturing prices push up input PPI

The input PPI measures the change in prices paid by producers for goods and services they use. In the June 2013 quarter, the input PPI increased 0.6 percent, following a 0.8 percent rise in the March 2013 quarter. The input PPI was unchanged in the year to the June 2013 quarter. This compares with a 1.9 percent increase in the year to the June 2012 quarter.

The input price index for dairy product manufacturing made the largest contribution to the rise in the input PPI. It increased 8.6 percent in the June 2013 quarter, reflecting Fonterra's latest forecast payouts (note: the June 2013 quarter bridges the last two months of the 2012/13 season and the first month of the 2013/14 season). This follows an increase of 4.5 percent in the March 2013 quarter.

For the year to the June 2013 quarter, the input price index for the dairy product manufacturing industry rose 8.6 percent. This is the first annual rise since a 13 percent increase in the year to the June 2011 quarter.

Graph, Producers price index, inputs – dairy product manufacturing, quarterly, June 2007 to June 2013.

Prices rise for logs and electricity

Export log prices rise – The price index for export logs rose 9.4 percent in the June 2013 quarter, influenced mainly by higher overseas demand. This is the largest rise since the March 2011 quarter (up 12 percent).

In the year to the June 2013 quarter, this index increased 19 percent, the highest annual increase since the year to the December 2010 quarter (up 29 percent).

Domestic log prices rise – The price index for domestic logs rose 4.0 percent in the June 2013 quarter, mainly influenced by higher demand. This is the largest increase since the June 2011 quarter (up 8.0 percent)..

In the year to the June 2013 quarter, this index increased 7.9 percent, the highest annual increase since the year to the June 2011 quarter (up 9.7 percent).

Electricity for commercial consumers rises  The price index for electricity for commercial consumers rose 11 percent in the June 2013 quarter. Survey respondents indicated that prices paid on the spot market influenced the rise.

In the year to the June 2013 quarter, this index decreased 0.5 percent.

Graph, Producers price index, selected commodities – domestic and export logs and commercial electricity, quarterly, June 2007 to June 2013.

New Zealand dollar depreciates against three major traded currencies

The New Zealand dollar depreciated against three major traded currencies in the June 2013 quarter, while appreciating against the Australian dollar and the Japanese yen. A depreciating New Zealand dollar has an upward influence on the prices paid by New Zealand producers for imported goods and services, as well as on prices received for exports.

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.

The table below shows changes in the value of the New Zealand dollar, in foreign currency denominations, from the midpoint of the March 2013 quarter to the midpoint of the June 2013 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 2013 
15 May 2013

0.8346
0.8064

0.5387
0.5293
0.8083
0.8172
77.5686
82.3255
0.6238
0.6212
Percentage change -3.4 -1.7 1.1 6.1 -0.4
Source: Westpac Banking Corporation

For more detailed data see the Excel tables in the ‘Downloads’ box.

Commodity reviews implemented this quarter

In the June 2013 quarter, redeveloped commodity indexes have been implemented for two industries: metal product manufacturing, and electricity, gas and water. Please see commodity reviews implemented in the 'Data quality' section for further details on specific commodities.

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