Increased fuel and energy costs drive up producers' prices

Increased fuel and energy prices were the main driver behind 2.7 per cent June quarter rises in both output and input prices in the Producers Price Index (PPI).

The rises were above expectation, with a Reuters poll of economists having a median of 2.1 per cent for inputs and 1.3 per cent for outputs.

The PPI measures the average level of industrial input prices (excluding labour) and output prices at the farm and factory gate.

Statistics New Zealand said that in the PPI outputs index, the wholesale trade index increased 5.6 per cent, mainly driven by higher prices for petrol and diesel. In the PPI inputs index it rose 7.5 per cent, driven by higher world crude oil prices.

The electricity generation and supply index was the only index to cause significant downward impact on both the output and input indexes of the PPI in the June quarter, SNZ said.

The electricity outputs index fell 0.9 per cent, reflecting spot market generation prices, while the electricity input index fell 10.5 per cent driven by lower electricity generation costs due to higher lake levels.

Among positive contributors to the PPI output index was a 16.2 per cent quarterly rise in the mining index, driven by higher prices for crude oil, condensates and natural gas, and increased spot-market prices for gold.

The petroleum, coal and basic chemical manufacturing index rose 17.1 per cent due to higher oil prices and higher refining margins in the Asia-Pacific region.

Another significant upward contributor to the PPI input index was the construction index, which rose 3.2 per cent, reflecting higher prices for diesel and petrol, and wire and cables in the construction trade services sector, SNZ said.

Also up was the air transport index, which rose 6.3 per cent due to higher aviation fuel prices.

On an annual basis the PPI outputs index was up 5.6 per cent, the largest annual movement since a 6.1 per cent rise in the year to June 2001.

The PPI inputs index was up 7.8 per cent on an annual basis, the largest annual increase since an increase of 8.1 per cent, also in the year to June 2001.

The quarterly increase in the PPI outputs index was the ninth in a row, and the largest quarterly movement since a similar 2.7 per cent rise in the September 2000 quarter.

Many respondents had noted that, along with rising energy costs, the depreciation of the NZ dollar during the June 2006 quarter was a significant factor in a number of output price rises.

- NZPA