Note about fuel in the PPI inputs indexes
Fuel is a component of all the PPI industry inputs indexes. For these indexes, there are variations in the types of fuel included, the source and frequency of price collection, and the timing of when price movements are shown. In a number of indexes, the current practice (in place for more than a decade) has been to 'lag' by one quarter the movements for diesel and heavy fuel oil. For example, diesel and heavy fuel oil price movements that actually occurred in the September 2008 quarter were shown in the PPI road transport inputs index for the December 2008 quarter. On the other hand, petrol and light fuel oil price movements used in the PPI road transport inputs index are not lagged. Price movements for petrol and light fuel oil that occur in a particular quarter are shown in the PPI road transport inputs index for that quarter.
Statistics NZ will review the practice of lagging diesel and heavy fuel oil prices by one quarter. If a decision is made to remove the one-quarter lag for diesel and heavy fuel oil price movements included in the PPI industry inputs indexes, the removal of the lag would be implemented at a time when fuel prices are relatively stable, so as not to cause undue disruption to the long-term level of the time series, or to the latest quarterly or annual movements.
The affected indexes are listed below:
- Mining – PPIQ.SNB
- Manufacturing – PPIQ.SNC
- Paper and paper product manufacturing – PPIQ.SNC08
- Printing, publishing and recorded media – PPIQ.SNC09
- Non-metallic mineral product manufacturing – PPIQ.SNC12
- Transport and storage – PPIQ.SNI
- Road transport – PPIQ.SNI01
- Water transport – PPIQ.SNI03
- Air transport – PPIQ.SNI04
- Rail, other transport and storage services – PPIQ.SNI09
- Personal and other services – PPIQ.SNQ
- Paper, printing and publishing – PPIQ.SNX08.
Price index interpretation
Price indexes are used to measure the changes in the level of prices, not the actual level of the prices themselves. The Producers Price Index (PPI) measures prices relating to the production sector of the economy. By comparison, the Consumers Price Index measures prices relating to the household sector, and the Labour Cost Index measures prices in the labour market.
The PPI is made up of two types of indexes: the outputs index, which measures changes in the prices received by producers; and the inputs index, which measures changes in the cost of production (excluding labour and capital costs). The Farm Expenses Price Index (FEPI) measures price changes specific to the inputs into the farming industry.
PPI outputs index
The outputs index measures changes in prices received by producers.
The outputs index covers the prices of:
- primary products
- manufactured goods
- revenue from renting and leasing
- the provision of services
- capital work undertaken by own employees
- margins on goods purchased for resale.
The outputs index excludes:
- interest and dividends
- royalties and patent fees
- receipts from insurance claims
- government cash grants and subsidies
- goods and services tax (GST) and other indirect taxes.
These indexes are designed to measure price changes at a level corresponding to the prices received before the addition of commodity taxes or deduction of subsidies.
PPI inputs index
The inputs index measures price changes in costs of production, excluding labour and depreciation costs.
The inputs index covers the prices of:
- materials
- fuels and electricity
- transport and communication
- commission and contract services
- rent and lease of land, buildings, vehicles and plant
- business services
- insurance premiums less claims.
The inputs index excludes:
- wages and salaries (measured in the Labour Cost Index)
- capital expenditure/depreciation (measured in the Capital Goods Price Index)
- ACC levies, land tax, government licence fees, road user charges
- rates
- royalties, patent fees
- bad debts and donations.
GST is excluded when measuring input prices for 45 of the 47 industry input indexes. The assumption is made that those involved in activities in these industries are 'registered persons, or businesses' that provide 'taxable supply'. GST paid on intermediate consumption is recoverable under the GST credit offset system and therefore is effectively not part of the ultimate input price. Exceptions include the finance, and the ownership of owner-occupied dwellings indexes, which include some 'GST exempt' and non-recoverable GST activities. Interest costs are excluded because they are regarded as a cost of capital and not as a payment for goods or a service.
Government charges are excluded when they are used to raise tax revenue rather than the payment for goods or a service purchased from the government. This is consistent with the System of National Accounts.
Farm Expenses Price Index
The Farm Expenses Price Index (FEPI) measures price changes of fixed inputs of goods and services to the farming industry. It does not fully measure changes in the production costs of farming. This is because production costs are not solely dependent on price movements, but are also dependent on factors that affect productivity, such as technological advances, management efficiency and climate fluctuations.
Capital expenditure and depreciation are not covered. (For price indexes of capital expenditure, refer to the Capital Goods Price Index.)
The Farm Expenses Price Index is now produced for the March quarter of each year only.
Coverage
The indexes are calculated quarterly from price quotes, which are collected mainly by postal survey. Approximately 13,000 individual commodity items are surveyed from about 3,000 respondents. Prices are generally collected each quarter, according to those prevailing on the fifteenth of the middle month of the quarter being measured. Prices may be obtained monthly or annually, depending on the nature of the item.
Calculation
The PPI and FEPI are Laspeyres base-weighted price index series. The weightings are determined by the relative importance of commodities and businesses within the industry or industry group. Information from various surveys and censuses and other sources is used to determine the weightings. Further information about this is available on request.
Data quality
All care has been used in the surveying, processing, analysing and extracting of data for the Producers Price Index. However, all data are subject to possible statistical uncertainty. These variations may result, for example, from uncertainty introduced during non-response imputation, reporting difficulties for respondents, or errors made during processing survey results.
Statistics NZ adopts procedures to detect and minimise avoidable variation and eliminate errors, but they may still occur and they are not quantifiable. At higher levels of aggregations, much of the individual variability often cancels out. The PPI data have been checked for the published indexes, and also for underlying indexes, to identify any remaining uncertainty and detectable errors. These are corrected or re-estimated, where possible.
Ongoing work to redevelop, reweight and enhance price indexes has the potential to change the underlying indexes. Accordingly, these data may be subject to revisions in the future.
Industry classification
The PPI inputs and outputs indexes cover all the major market industry groups as defined by the Australian and New Zealand Standard Industrial Classification 1993 (ANZSIC). Index numbers for industry indexes based on this classification are available from the June 1994 quarter.
The all industries inputs index is made up of 47 industry indexes. Outputs indexes are not available for public administration and defence, education, health and community services, cultural and recreational services, and personal and other services industries, as reliable estimates of output prices have yet to be developed.
Customised price indexes
Statistics NZ has a large number of unpublished sub-industry and representative commodity price indexes. These indexes are available at a small charge to cover dissemination costs.
Price index development
The following is a detailed analysis of the output indexes affected by redevelopments that took place in the June 2009 quarter.
Horticulture and fruit growing
Information used to redevelop this index is based on the Annual Enterprise Survey, the Agricultural Production Survey, information from numerous industry groups and companies involved in the industry.
There have been a number of changes to the industry since the last redevelopment in 1996. The largest change was an increase in the relative weight of kiwifruit.
Output Commodity Weights for Horticulture and Fruit Growing March 2009 quarter |
| Commodity |
Weight (%) |
| Kiwifruit |
31.43 |
| Vegetables |
30.62 |
| Pipfruit |
19.62 |
| Nursery products |
4.76 |
| Cut flowers |
3.17 |
| Other |
10.40 |
The 'other' group includes commodities such as grapes, berryfruit, grain, stonefruit, citrus fruit, and other fruit.
Livestock and cropping farming
Information used to redevelop this index is based on the Annual Enterprise Survey, the Agricultural Production Survey, information from numerous industry groups and companies involved in the industry.
Output Commodity Weights for Livestock and Cropping Farming March 2009 quarter |
| Commodity |
Weight (%) |
| Beef – prime |
33.45 |
| Sheep and lamb – store |
17.47 |
| Sheep and lamb – prime |
14.86 |
| Wool |
10.40 |
| Beef – store |
7.55 |
| Other |
16.27 |
The 'other' group includes commodities such as milk, grain, vegetables, deer – prime, deer – store, seed crops, deer – velvet, feed crops, and dairy cattle.
Dairy cattle farming
Information used to redevelop this index is based on the Annual Enterprise Survey, the Agricultural Production Survey, information from numerous industry groups and companies involved in the industry.
The largest change has been an increase in the milk commodity.
Output Commodity Weights for Dairy Cattle Farming
March 2009 quarter |
| Commodity |
Weight (%) |
| Milk |
93.73 |
| Other |
6.27 |
The 'other' group includes commodities such as beef – prime, beef – store, and dairy cattle.
Other farming
Information used to redevelop this index is based on the Annual Enterprise Survey, the Agricultural Production Survey, information from numerous industry groups and companies involved in the industry. The largest changes have been an increase of the eggs commodity, and a decrease in the poultry commodity.
Output Commodity Weights for Other Farming March 2009 quarter |
Commodity |
Weight (%) |
Pigs – prime |
14.79 |
Eggs |
14.04 |
Beef – prime |
10.76 |
Deer – prime |
9.42 |
Deer – store |
8.14 |
Other |
42.85 |
The 'other' group includes commodities such as milk, poultry, other animal products, sheep and lamb – store, grain, sheep and lamb – prime, other animals, beef – store, mushrooms, wool, vegetables, deer – velvet, feed crops, dairy cattle, seed crops, and pigs – store.
Note about milk in the agriculture outputs indexes
Historically, changes in the whole-milk payout have only been shown in every September quarter of the PPI. Part of the redevelopment of the four agriculture outputs indexes involved reviewing this methodology. The planned new methodology will involve taking the most recently published figure for the forecast final payout, and showing movements in this figure on a quarterly basis.
However, in order to reduce the amount of disruption to the time series, the old methodology will continue up until the September 2009 quarter. This would capture the annual movement in the payout between the September 2008 and September 2009 quarters, and show this movement in the PPI. The new methodology will then take effect from the December 2009 quarter onwards.
The dairy product manufacturing inputs index will also be affected when the new methodology is implemented.
Mining
Information used to redevelop this index is based on the Annual Enterprise Survey and companies involved in the industry.
The most significant changes since the industry was last redeveloped in 1997 has been the increase in the output of natural gas extraction, and the introduction of a gold ore component into the other mining industry.
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Output Commodity Weights for Mining March 2009 quarter |
| Commodity |
Weight (%) |
| Natural gases |
20.44 |
| Crude and condensates |
19.60 |
| Gold ore |
18.08 |
| Iron sands |
13.23 |
| Other |
28.65 |
The 'other' group includes commodities such as seismic exploration and well-drilling activities.
Retail trade
Information used to redevelop this index is based on the Annual Enterprise Survey and companies involved in the industry.
Output Commodity Weights for Retail Trade March 2009 quarter |
| Commodity |
Weight (%) |
| Vehicle maintenance and repair services |
12.50 |
| Clothing products |
7.07 |
| Other private transport services |
5.29 |
| New and used cars |
4.84 |
| Non-prescribed pharmaceutical products |
4.83 |
| Takeaway foods |
4.73 |
| Furniture |
4.67 |
| Audio-visual equipment |
3.13 |
| Motorcycles |
2.67 |
| Other |
50.27 |
Please note that goods purchased by producers for retail sale are weighted based on the margins made, as opposed to sales turnover.
For further information on the redevelopment, please contact Patricia Jennings at info@stats.govt.nz.
Back series of indexes
Statistics NZ will provide tables of the complete back series of the current PPI and FEPI indexes on request.
More information
For more information, follow the link from the Technical notes of this release on the Statistics NZ website.
Copyright
Information obtained from Statistics NZ may be freely used, reproduced, or quoted unless otherwise specified. In all cases Statistics NZ must be acknowledged as the source.
Liability
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Timing
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