The capital goods price index (CGPI) fell by 0.4 percent in the September 2009 quarter, which took the annual change to a 2.3 percent increase.  This is the second consecutive quarter of easing in annual prices, following rapid increases over 2008. It is also the first quarterly fall in prices since the March 2003 quarter.

On the September 2009 quarter, four of the six asset groups fell, with the most significant contribution coming from the non-residential buildings index (down 1.4 percent).  Pushing prices up this quarter were the transport equipment and other construction indexes. 

Within non-residential buildings, warehouses and factories were down 3.2 percent, and shops and offices were down 1.0 percent.  The main reasons for the falls were lower labour and material costs for steel reinforcing and structural steelwork.  The fall in the plant, machinery and equipment index was put down to the appreciating New Zealand Dollar.

Pushing prices up on the quarter was transport equipment, which respondents put down to higher supplier prices for cars over 1600cc.   Capital Goods Prices should remain constrained over the next few quarters, particularly with the higher exchange rate.  However, we can expect increases to continue in the 0 to 2 percent range over the medium term.