Producers Price Index: March 2009 quarter

Outputs

Output prices for all industries in the PPI fell 1.4 percent in the March 2009 quarter, following rises of 1.4 percent in the December 2008 quarter and 2.8 percent in the September 2008 quarter. Dairy product manufacturing, wholesale trade, and petroleum, coal and basic chemical manufacturing were the major contributors to the fall in the latest quarter.

The dairy product manufacturing index (down 24.3 percent) had the greatest downward impact on the output prices in the March 2009 quarter. The fall in the latest quarter is the highest recorded since the series began in the June 1994 quarter, and it followed a 19.2 percent rise in the December 2008 quarter and 2.5 percent fall in the September 2008 quarter. The main driver of the index in the latest quarter was lower prices for exported dairy products such as skim milk powder, cheese and butter.

In the year to the March 2009 quarter, the dairy product manufacturing index fell 12.4 percent. This compares with a 50.4 percent rise in the year to the March 2008 quarter and a 3.4 percent fall in the year to the March 2007 quarter.

The wholesale trade index, which made the second-largest contribution to the decrease in output prices, fell 3.8 percent in the March 2009 quarter, following the same percentage fall in the December 2008 quarter and a 4.3 percent rise in the September 2008 quarter. The main contributor to the fall in the latest quarter came from the petroleum products wholesaling index, which was driven down by lower fuel prices (mainly due to lower crude oil prices).

On an annual basis, the wholesale trade index rose 2.3 percent in the year to the March 2009 quarter compared with rises of 8.9 percent and 5.1 percent in the years to the March 2008 and March 2007 quarters, respectively.

The petroleum, coal and basic chemical manufacturing index (down 18.8 percent) exerted a downward impact on the fall in output prices in the March 2009 quarter. This fall follows rises of 27.2 percent in the December 2008 quarter and 14.9 percent in the September 2008 quarter. The latest quarterly fall is the largest in this index since the series began in the June 1994 quarter. Major decreases were recorded in the prices of phosphatic fertiliser and urea manufacturing, which were driven by lower suppliers’ prices and competition.

In the year to the March 2009 quarter, the petroleum, coal and basic chemical manufacturing index rose 16.8 percent, following rises of 12.3 percent in the year to the March 2008 quarter, and 4.3 percent in the year to the March 2007 quarter.

In the March 2009 quarter, the major offsetting effect on the output prices came from the finance index (up 14.6 percent). This index is dominated by 'financial intermediation services indirectly measured' (FISIM), which is a notional measure of the margins that financial intermediaries make on their borrowing and lending operations. In the latest quarter, this margin increased due to the rates for borrowing falling more than the rates for lending. The increase in the finance index followed rises of 10.0 percent in the December 2008 quarter and 6.1 percent in the September 2008 quarter.

On an annual basis, the finance index rose 32.1 percent in the year to the March 2009 quarter compared with falls of 2.0 percent and 4.9 percent in the years to the March 2008 and March 2007 quarters, respectively. Both the quarterly and annual rises in the finance index in the March 2009 quarter were the largest recorded since the series began in the June 1994 quarter.

 

In the year to the March 2009 quarter, the PPI outputs index rose 6.5 percent compared with rises of 6.1 percent in the year to the March 2008 quarter and 3.1 percent in the year to the March 2007 quarter.

Inputs

Input prices for all industries fell 2.5 percent in the March 2009 quarter, following a 2.2 percent fall in the December 2008 quarter and a 3.7 percent rise in the September 2008 quarter. The fall in the latest quarter is the largest since the series began in the December 1977 quarter.

The largest contribution to the overall fall in the PPI inputs index came from the wholesale trade index (down 12.7 percent). The fall followed an 11.7 percent decrease in the December 2008 quarter and rises of 8.3 percent and 9.0 percent in the September 2008 and June 2008 quarters, respectively. Lower prices for imported crude oil, a major input to petroleum product wholesaling, were the main drivers of this fall.

In the year to the March 2009 quarter, the wholesale trade index fell 8.9 percent, compared with a 13.4 percent rise in the year to the March 2008 quarter and a 0.1 percent rise in the year to the March 2007 quarter.

The second-largest contributor to the fall in the PPI inputs index was a 14.4 percent decrease in the air transport index. This decrease is the largest since the series began in the December 1997 quarter. The latest fall followed a 10.3 percent fall in the December 2008 quarter, and rises of 14.1 percent in the September 2008 quarter and 13.0 percent in the June 2008 quarter. Lower prices for various aviation fuels were a major cause of the decrease in the latest quarter.

In the year to the March 2009 quarter, the air transport index fell 1.1 percent. This contrasts with a 13.3 percent rise in the year to the March 2008 quarter and a 2.7 percent rise in the year to the March 2007 quarter.

Some fuel prices are lagged by one quarter in the PPI industry inputs indexes. Please see the 'Technical notes' section for information.

The third-largest contribution came from the meat and meat product manufacturing index, which was down 7.3 percent compared with falls of 8.6 percent in the March 2008 quarter and 12.5 percent in the March 2007 quarter. The latest quarterly fall was mainly a result of lower prices for prime beef livestock (see the 'Commodities' section).

In the year to the March 2009 quarter, the meat and meat product manufacturing index rose 21.9 percent. In comparison, this index fell 2.0 percent in the year to the March 2008 quarter and rose 4.0 percent in the year to the March 2007 quarter.

Other food manufacturing (up 1.8 percent) had a small offsetting effect on the overall fall in input prices. The latest rise in this index followed rises of 1.6 percent in the December 2008 quarter and 3.8 percent in the September 2008 quarter. Higher prices for fresh fish made a large contribution to the rise in the latest quarter. Supply and demand was the main reason cited by respondents.

In the year to the March 2009 quarter, the other food manufacturing index rose 12.2 percent. This is the largest annual movement since the series began in the June 1994 quarter.

Input prices for all industries rose 4.7 percent in the year to the March 2009 quarter. This compares with rises of 7.3 percent in the year to the March 2008 quarter and 2.5 percent in the year to the March 2007 quarter.

Commodities

The livestock: sheep and lamb index rose 3.4 percent in the March 2009 quarter, following rises of 5.1 percent in the December 2008 quarter and 22.6 percent in the September 2008 quarter. The latest quarterly rise was mainly driven by higher demand and by shortage in the supply for stock of store lamb, hoggets and ewes.

On an annual basis, the livestock: sheep and lamb index rose 47.1 percent in the year to the March 2009 quarter and fell 0.7 percent in the year to the March 2008 quarter.

The livestock: cattle index fell 11.4 percent in the March 2009 quarter, following an 8.1 percent fall in the December 2008 quarter and a 23.8 percent rise in the September 2008 quarter. The decline in the latest quarter resulted from lower prices for prime steers and bulls.

On an annual basis, the livestock: cattle index rose 9.3 percent in the year to the March 2009 quarter and fell 6.2 percent in the year to the March 2008 quarter.

 

One of the largest downward movers among the published commodity indexes was fertiliser (down 25.5 percent), which showed rises of 44.4 percent in the December 2008 quarter and 36.4 percent in the September 2008 quarter. The latest quarterly fall is the largest since the series began in the June 1994 quarter and was mainly driven by decreased prices for various phosphatic fertilisers (due to lower suppliers' prices and competition).

On an annual basis, the fertiliser index recorded rises of 54.6 percent in the year to the March 2009 quarter, and 30.8 percent in the year to the March 2008 quarter.

The pulp index fell 10.0 percent in the March 2009 quarter – the largest quarterly fall since the March 2001 quarter when it fell 17.4 percent. The latest fall follows rises of 1.1 percent in the December 2008 quarter and 9.8 percent in the September 2008 quarter. The latest quarterly movement was driven by lower prices for exports of chemical pulp (due to falling demand and lower international prices).

On an annual basis, the pulp index recorded rises of 5.0 percent in the year to the March 2009 quarter and 1.3 percent in the year to the March 2008 quarter.

The electricity for commercial users index fell 14.8 percent in the latest quarter, following falls of 11.6 percent in the December 2008 quarter, and 5.3 percent in the September 2008 quarter. Increased supply in the hydro lakes and lower spot market prices (associated with lower demand in summer) led to lower prices in the current quarter.

On an annual basis, the electricity for commercial users index fell 2.5 percent in the year to the March 2009 quarter, and rose 15.6 percent in the year to the March 2008 quarter.

Impact of exchange rates

When calculating the PPI, prices collected on the fifteenth 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 New Zealand dollar depreciated against all key currencies of the country's five major trading partners in the March 2009 quarter. The table below shows changes in the value of the New Zealand dollar in foreign currency denominations from the December 2008 quarter to the March 2009 quarter.

Price index developments

Statistics New Zealand began work in 2004 on a progressive redevelopment of PPIs. This involves re-evaluating the items that are priced and the weights that are applied to them. At this stage, the redevelopment applies only to output indexes. New input indexes will be finalised once all the output indexes have been redeveloped.

The following index within the construction index (PPIQ.SUE) has been redeveloped and took effect from the March 2009 quarter:

• Construction trade services.

For more information, please see the 'Technical notes' section.

For technical information contact:
Mark Gordon or Suchindra Nanayakkara
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...

Producers Price Index: June 2009 quarter will be released on 19 August 2009.