Lower fuel costs drive down producer input, output prices in first quarter

Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products.

Prices received by producers, or the output producer price index, fell 0.9% in the first three months of the year, for an annual decline of 2.5%, according to Statistics NZ. Prices paid by producers, or input PPI, fell 1.1% in the quarter for an annual decline of 4%.

The PPI figures confirm other data that shows inflation pressures were weak in the first quarter, with the exception of the construction industry, the government statistician said. Falling petrol and diesel prices were the main contributor to a 0.3% decline in the consumer price index in the first quarter that resulted in an annual inflation rate of just 0.1%. The Reserve Bank moved to a tacit easing bias, dropping reference to the prospect of higher rates, in the wake of the inflation data.

Prices received by sheep, beef cattle and grain farmers dropped 11% in the first quarter, reflecting drought in some regions and higher rates of slaughter. Prices received by dairy farmers dropped 4.6% as the farm-gate milk price fell further. Farmers' input costs, measured by the farm expenses price index, declined 0.5%, mainly on lower fuel prices.

Prices paid by meat manufacturers fell 8.8% on lower prices for sheep and lamb, while prices they received fell 2.4% on lower prices for beef and sheepmeat exports.

Prices paid by dairy product manufacturers fell 3.3% on the decline in the farm-gate milk price, while prices they received dropped 5.2% on lower export prices for milk powder.

Construction industry prices were higher. Prices received by construction companies rose 0.6% in the quarter, mainly on higher prices for building new houses, while prices paid by the industry fell 0.3% on lower fuel prices.

The capital goods price index rose 0.6% in the first quarter, largely driven by the price of building houses, and was up 2.8% in the year. In the year ended in the March quarter, newly built house prices rose 5%, while in Auckland they gained 5.9%.

Prices received by electricity and gas companies rose 1.9% in the quarter as lower lake levels drove up electricity prices.

(BusinessDesk)