In the December 2008 quarter, capital goods prices were up 1.1% on the quarter and 4.1% on the year. Meanwhile producer price outputs were up 1.4% on the quarter and 9.9% on the year, and input prices were down 2.2% on the quarter but up 9.7% on the year.

Exchange rates can cop a fair bit of the blame, with the New Zealand dollar depreciating against three of the five trading partners, including by 21.2 percent against the US$.  We would hate to have seen how high the index would have gone if there was no easing in building and construction.

Capital Goods Price Index

The Capital Goods Price Index (CGPI) rose 1.1% in the December 2008 quarter, and 4.1% in the year to the December 2008 quarter.
On the quarter, the greatest upward movement came from the plant, machinery and equipment index (up 3.4%), followed by the land improvement (up 2.0%), transport equipment (up 1.5%) then other construction (up 0.9%) indexes.

Falls were recorded in the residential buildings index (down 0.3%) and non-residential buildings index (down 0.2%).

On the year, the greatest upward prices were from land improvement (up 12.7%), plant machinery and equipment (6.0%), other construction (5.5%), non-residential buildings (3.0%), residential buildings (2.9%), then transport equipment (2.6%).

The major factor pushing the CGPI up is depreciation in the New Zealand dollar resulting in higher prices for imported supplies and equipment, while lower prices for new houses and reduced contractors margins as the recession starts to bite are pushing prices down.

Producers Price Index

Meanwhile, producers' output prices rose 1.4% and input prices fell 2.2% in the December 2008 quarter. The main contributor to the rise in output prices was the dairy product manufacturing index, while fuel wholesaling within the wholesale trade index, was the most significant contributor to the fall in the inputs index.

In the year to the December 2008 quarter, the PPI outputs index rose 9.9% and the PPI inputs index rose 9.7%.

Higher export prices for dairy products such as milk powder, butter and cheese saw the dairy product manufacturing outputs index rose 19.2% in the December 2008 quarter, following a fall of 2.5% in the September quarter. In the year to the December 2008 quarter, the dairy products index rose 31.6%, following a 33.9% rise in the previous year.

Lower prices for crude oil saw the wholesale trade inputs index fall 11.7% in the December 2008 quarter. This follows rises of 8.3% rise in the September 2008 quarter and 9.0% in the June 2008 quarter.

Lower spot market prices and demand, and an increase in the hydro lake levels saw both output and input prices fell for electricity generation and supply in the December 2008 quarter. The electricity generation and supply outputs index fell 14.4%, while the inputs index fell 32.3%.