PPI stronger than expected

Higher fuel prices helped push up producer prices in the September quarter, data released today from Statistics New Zealand shows.

The Producers Price Index (PPI) jumped 1.8 per cent in the September quarter for inputs, and 2.9 per cent for per cent for producer's outprices.

Economists polled by Reuters had forecast a rise of 1.5 per cent in inputs and 1.1 per cent for outputs on the previous quarter.

In the year ended September, the PPI outputs index rose 4.1 per cent and the inputs index rose 6.1 per cent -- the highest annual rises since 2001.

The major driver behind the rise in the outputs index for the September quarter was a 2.9 per cent increase in the wholesale trade index, where price increases were driven by rising prices for mineral, metals and chemicals -- reflecting higher fuel prices.

An increase in the wholesale trade index was also the main reason behind the quarterly rise in the PPI inputs index. The 8.8 per cent rise in the wholesale trade inputs index was driven by the higher cost of crude oil.

The higher than expected PPI figures firms expectations the Reserve Bank will again raise interest rates next month.

Deutsche Bank senior economist Darren Gibbs said the high PPI in part explained the recent pessimism in the business sector.

" Profitability is coming under pressure, they're paying more for labour, paying more for raw materials -- there's lots of inflation pressure there. The Reserve Bank will hike on December 8 probably by 25 basis points but you can't rule out more," he said.

The Reserve Bank last lifted the official cash rate last month by 25 basis points to 7 per cent, the highest in the developed world.

- NZPA