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

About the producers price index

The producers price index (PPI) measures changes in prices of outputs that generate operating income and inputs that incur operating expense. It measures changes in prices relating to the supply (output) and use (inputs) of goods and/or services by the productive sector. The PPI therefore does not include prices for items related to capitalised expenditure, non-operating income, financing costs, and employee compensation. It does not cover depreciation, or income related to property ownership when this is not the normal source of operating income.

The PPI is made up of multiple price sub-indexes, each one having a 'basket' of goods and services. The basket details what is priced and what weight is attached to each price for calculating a composite index. Each sub-index of the PPI is weighted to represent its share of the higher-level index.

The industry-based indexes presented in this publication represent the mix of goods and/or services either used or supplied by that industry. These weights are derived from the percentage of income or expenditure that the respective goods and/or services represent. These weights are important because they help determine the overall index change that results from many price changes.

The PPI differs from the consumers price index (CPI). The CPI shows the overall price-level change for goods and services consumed by the household sector while the PPI measures prices relevant to the productive sector in terms of supply and use. The productive sector is generally made up of institutions that are not households (eg farms, sole proprietors, partnerships, corporations, cooperatives, government, and non-government organisations).

More definitions

All-industries index: an overall PPI represents the price change for inputs, and for outputs, for the total productive sector. Both represent the weighted combination of industry-level indexes and are labelled ‘all industries’ in the PPI.

  • What is and what isn't priced differs in the output and the input price indexes at the all-industries level.
  • In the all-industries output index, non-market outputs (eg those produced by public administration and safety, education, and health) are not priced.
  • In the all-industries input index, inputs into these industries are priced.
  • For consistency, an 'all-industries excluding these primarily non-market industries index' is available in the tables of this information release.

Commodity: goods or services for which a price is collected, often referred to as an item or a product. Currently, the PPI uses a mix of product classifications but is standardising them to be in line with the international Central Product Classification. Each commodity can be used in multiple indexes within the PPI. Each time it is used, it carries a weight that is relevant to the (sub-)index in which it is used. For example, diesel is used in varying amounts in each industry and is also an output of the retail, wholesale, and/or manufacturing industries.

Input indexes: measure changes in prices paid by producers for goods and services they use. Goods and services used by New Zealand producers are priced and weighted to present an input price index for each industry. Inputs can either be domestically supplied or imported.

Output indexes: measure changes in the prices of goods and services received by producers. Goods and services produced are priced and weighted to present an overall output price index for each industry. This output can be used, domestically or abroad, by other producers or by final consumers.

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