Producers prices fell in the quarter to March 2009 resulting in an easing on the year.  However, the capital goods price index was up on the quarter and the year due to the depreciation in the New Zealand exchange rate in the March 2009 quarter.

PPI

As noted in the graph, producers prices are easing back, with large falls in the March 2009 quarter. Driving these falls were dairy product manufacturing and wholesale trade on the outputs side and wholesale trade and air transport on the inputs side. Key drivers of the fall in inputs were lower prices for imported crude oil and various aviation fuels. For dairy outputs, it was the lower prices for exported products such as skim milk powder, cheese and butter.

The producers prices index eased in the March 2009 quarter, with outputs dropping 1.4 percent and inputs dropping 2.5 percent. On the year, however, prices remained up, with output prices up 6.5 percent and input prices up 4.7 percent.
The major factor in the fall in output prices was dairy product manufacturing, which fell by 24.3 percent on the quarter. On the inputs side, wholesale trade prices fell by 12.7 percent.

Producers input prices fell for the second consecutive quarter after six quarters of increases. For outputs, this was the first fall in seven quarters.

Dairy prices are expected to stay low over the next year. However, fuel prices appear to be on the increase again suggesting that any further easing will have to come from other sources. Electricity prices, which spiked in the June 2008 quarter on both inputs and outputs have come back down, and with the lakes full, can be expected to remain low as well, which should flow into other areas.

- The PPI was released on 18 May 2009.

CGPI

Unfortunately, the Capital Goods Price Index (CGPI) continues to rise. However, the main driver of price increases has been the lower exchange rate. The greatest increases have therefore come from transport equipment and plant, machinery and equipment indexes.

The CGPI rose 1.2 percent on the quarter, up 4.9 percent on the year. The annual increase is the largest annual rise since the series began in 1989.

With the New Zealand dollar appreciating significantly over the last quarter, we can expect the CGPI to ease in the next quarter again. Land improvements, residential and non-residential buildings indices continue to apply downward pressure on the CGPI. The indices for residential buildings and non-residential buildings have fallen for the last two quarters. The last time the residential buildings index fell was in 1998 and for non-residential building in 1989.

- The CGPI was released on 18 May 2009.