The PPI outputs index rose 8.5 percent and the PPI inputs index rose 11.8 percent on the year to June 2008 quarter.  On the quarter, output prices were up 3.5 percent and input prices were up 5.6 percent.

The quarterly rise in the outputs index is the largest in 23 years, while the quarterly rise in the inputs index is the largest in 28 years.

Driving prices up for producers is electricity generation.  On the outputs side, the electricity generation and supply index rose 30.9 percent on the quarter and 41.7 percent on the year.  On the inputs side, electricity generation and supply rose 50.8 percent in the quarter and 85.4 percent on the year.  These are all record increases, driven by lower lake levels.

Other industries contributing to the increase in the outputs index were the wholesale trade index, which was up 6.0 percent on the quarter and 13.8 percent on the year; and the livestock and cropping farming index, which was up 8.2 percent on the quarter and 8.9 percent on the year.  The finance index was down 1.3 percent on the quarter and down 5.5 percent on the year.

On the inputs side, all industry indices were up.  The major contributors were thee wholesale trade index, which was up 6.4 percent on the quarter and 16.5 percent on the year; and the air transport index, which was up 13.0 percent on the quarter and 28.0 percent on the year.

Producer prices are often a precursor to consumer prices as producers will eventually have to raise prices as their costs increase.  There is already pressure on producers to raise prices and so it will be interesting to see how this flows through to the CPI.

More detail on the PPI can be found on the Statistics New Zealand website here.