By BRIAN FALLOW
Producers' prices are rising at the fastest rate for 10 years, fuelling fears of inflation in a week which saw the dollar fall 3 per cent.
The producers' inputs index rose 1.2 per cent for the June quarter and 5.5 per cent for the year. Oil accounted for about a quarter of the increase.
Producers' output prices were also higher but not as much - 1 per cent for the quarter and 3.9 per cent for the year.
Most firms were facing increased costs, Statistics New Zealand said. Firms it had contacted, including manufacturers, wholesalers and retailers, expressed a reluctance to lift prices in order to remain competitive.
"However, many have indicated that prevailing higher input costs will need to be passed on to customers in the near future," it said.
The Canterbury Employers' Chamber of Commerce quarterly business opinion survey, released yesterday, found 51 per cent of its nearly 500 respondents expected higher costs over the next three months. Eleven per cent intend to raise their own prices, compared with 5 per cent who raised them in the past three months.
Chamber chief executive Peter Townsend said sentiment had flattened off after a dramatic fall in May, with 27 per cent pessimistic about the general business situation.
The outlook for profitability had worsened over the August quarter, he said, as rising costs squeezed margins.
ANZ Bank chief economist Bernard Hodgetts said it was unlikely that producers' price inflation had peaked, given that the New Zealand dollar was now some 9 per cent lower than in the June quarter.
Deputy Government Statistician Ian Ewing said not all producer prices flowed through to consumers because many products were exported, while consumer prices were also tempered by other influences such as labour costs and the effect of competition on margins.
Deutsche Bank chief economist Ulf Schoefisch said upstream price pressures and their flow-on into consumer prices would be significantly more problematic than the Reserve Bank acknowledged in its August 16 statement. "We continue to forecast annual CPI inflation to reach 3 per cent over the next few quarters and remain above 2 per cent for a prolonged period."
Rising producer prices add to inflation fears
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