Producers Price Index: December 2009 quarter – revised

Revisions

Revisions have been made to some producers price index (PPI) figures for the December 2009 quarter, originally published on 16 February 2010.

Dairy product and chemical prices received late in the processing cycle but not included in the originally published figures, have been included in the corrected figures.

A new method for measuring change in farm-gate milk prices was introduced in the December 2009 quarter. The new method involves taking the most recently published figure for the forecast final milk payout, and showing movements in this figure on a quarterly basis. A correction has been made, as the PPI published on 16 February showed an increase from the final milk payout figure for the previous season to the latest available forecast payout for the current season, rather than from an earlier forecast figure for the current season.

Although the impact at the all industries level is small (3 index points for outputs and 2 index points for inputs), the all industries index numbers for the December 2009 quarter have also been corrected, to maintain consistency with the industry groups.

The following series are affected:

• Agriculture, forestry, and fishing outputs (PPIQ.SUA)
• Livestock and cropping farming outputs (PPIQ.SUA02)
• Dairy cattle farming outputs (PPIQ.SUA03)
• Other farming outputs (PPIQ.SUA04)
• Manufacturing outputs (PPIQ.SUC)
• Dairy product manufacturing outputs (PPIQ.SUC02)
• Petroleum, coal, and basic chemical manufacturing outputs (PPIQ.SUC10)
• Agriculture outputs (PPIQ.SUX01)
• Food, beverages, and tobacco outputs (PPIQ.SUX05)
• Chemicals, petroleum, and plastics outputs (PPIQ.SUX09)
• All industries outputs (PPIQ.SU9)
• Manufacturing inputs (PPIQ.SNC)
• Dairy product manufacturing inputs (PPIQ.SNC02)
• Petroleum, coal, and basic chemical manufacturing inputs (PPIQ.SNC10)
• Food, beverages, and tobacco inputs (PPIQ.SNX05)
• Chemicals, petroleum, and plastics inputs (PPIQ.SNX09)
• All industries excluding administration, health, and education inputs (PPIQ.SN8)
• All industries inputs (PPIQ.SN9)
• Dairy products (excl milk and cream) commodity (PPIQ.SC09).

The December 2009 quarter Hot Off the Press tables have been updated, and a revisions table has been attached. The revisions table gives the originally published and revised index numbers, quarterly percentage changes, and annual percentage changes. The revised index numbers are also available on Infoshare (under Economic indicators, Producers Price Index).

Outputs

Output prices for all industries in the PPI fell 0.4 percent in the December 2009 quarter, following falls of 1.4 percent in the September 2009 quarter, and 0.7 percent in the June 2009 quarter.

The meat and meat products manufacturing index is the major downward contributor to the PPI outputs index in the December 2009 quarter. The dairy cattle farming index had the major offsetting impact.

 

The meat and meat products manufacturing index (down 8.5 percent) had the largest downward impact on output prices in the December 2009 quarter. The fall in the latest quarter was the largest quarterly fall since the series began in the June 1994 quarter. The latest quarterly fall followed smaller falls of 0.3 percent in the September 2009 quarter and 3.7 percent in the June 2009 quarter. The fall in the latest quarter's index was driven by lower export prices for boneless beef and frozen sheep meat.

In the year to the December 2009 quarter, the meat and meat product manufacturing index fell 12.5 percent, which is the largest annual fall since the series began in the June 1994 quarter. The latest annual fall compares with rises of 18.7 percent and 3.9 percent in the years to the December 2008 and December 2007 quarters, respectively.

The finance index was the second largest downward contributor, falling 4.8 percent in the December 2009 quarter. The financial intermediation charges index decreased due to the interest rates for lending falling more than the New Zealand dollar interest rates for borrowing. For more details, please see the 'pricing financial services' section in the Technical notes.

The livestock and cropping farming index (down 4.8 percent) had the third largest downward impact on output prices in the December 2009 quarter. The fall in the latest quarter was driven by lower prices for prime sheep and cattle. It was the largest quarterly fall since the March 2008 quarter when it fell 8.4 percent. The latest quarterly fall followed a 0.7 percent fall in the September 2009 quarter and a 1.1 percent rise the June 2009 quarter.

In the year to the December 2009 quarter, the livestock and cropping farming index fell 7.7 percent, following a rise of 15.3 percent in the year to the December 2008 quarter and a 4.3 percent fall in the year to the December 2007 quarter.

The dairy cattle farming index (up 17.8 percent) had the largest offsetting impact on output prices in the December 2009 quarter. The latest quarter's index was driven by increased farm-gate prices for whole-milk. Previously a change in the whole-milk payout was shown only in the PPI each September quarter. A new method that involves taking the most recently published figure for the forecast final milk payout, and showing movements in this figure on a quarterly basis, has been implemented from this quarter onwards.

The PPI outputs index fell 3.8 percent in the year to the December 2009 quarter, recording the largest annual fall since the series began in the December 1977 quarter. The latest annual fall contrasts with rises of 9.9 percent and 4.0 percent in the years to the December 2008 and December 2007 quarters, respectively. Output prices are now at about the same level as they were in the June 2008 quarter.

Inputs

Input prices for all industries in the PPI rose 0.3 percent in the December 2009 quarter. This follows a fall of 1.1 percent in the September 2009 quarter, and no change in the June 2009 quarter.

 

The dairy product manufacturing index (up 15.2 percent) made the most significant upward contribution to the inputs index. The main driver of the increase in the December 2009 quarter was higher whole-milk prices at the farm-gate. As mentioned in the outputs commentary, a new method that involves taking the most recently published figure for the forecast final payout, and showing movements in this figure on a quarterly basis, has been implemented this quarter.

The second most significant contribution to the inputs index came from the electricity generation and supply index. The index rose 6.7 percent, following an 8.2 percent fall in the September 2009 quarter, and a 10.4 percent rise in the June 2009 quarter. Respondents cited market conditions as the main reason for the rise in electricity generation and supply prices. Higher prices for natural gas, used in the generation of electricity, also contributed to the latest quarter's rise.

On an annual basis, the electricity generation and supply index rose 6.5 percent in the year to the December 2009 quarter. This follows falls of 0.9 percent and 1.4 percent in the years to the December 2008 and December 2007 quarters, respectively.

The largest downward contribution came from the meat and meat product manufacturing index (down 9.3 percent). This contrasts with rises of 0.7 percent in the September 2009 quarter, and 4.9 percent in the June 2009 quarter. The latest fall was mainly driven by lower prices for sheep and cattle livestock.

The meat and meat product manufacturing index fell 11.1 percent in the year to the December 2009 quarter. This annual fall is the largest since a 13.9 percent fall in the year to the June 2003 quarter. There was a rise of 20.2 percent in the year to the December 2008 quarter, and a fall of 6.2 percent in the year to the December 2007 quarter.

The wholesale trade index (down 0.9 percent) was the second largest downward contributor to the all inputs index. This follows an increase of 5.6 percent in the September 2009 quarter, and a fall of 0.1 percent in the June 2009 quarter. The latest fall in the index was mainly driven by a fall in the price of imported crude oil in the mineral, metal, and chemical wholesaling index.

On an annual basis, the wholesale trade index fell 8.8 percent in the year to the December 2009 quarter. This follows rises of 6.8 percent in the year to the December 2008 quarter, and 8.4 percent in the year to the December 2007 quarter.

Input prices for all industries fell 3.3 percent in the year to the December 2009 quarter. This follows rises of 9.7 percent in the year to the December 2008 quarter, and 4.3 percent in the year to the December 2007 quarter.

Commodities

The electricity: commercial consumers index fell 10.6 percent in the December 2009 quarter, driven by lower retail electricity prices for businesses. This contrasts with rises of 2.2 percent and 20.2 percent in the September and June 2009 quarters respectively.

On an annual basis, the index fell 6.4 percent in the year to the December 2009 quarter. This compares with a 27.4 percent rise in the year to the December 2008 quarter, and a fall of 5.4 percent in the year to the December 2007 quarter.

Impact of exchange rates

When calculating the PPI, prices collected on the fifteenth day of the middle month in the quarter are generally used to represent the entire quarter. Prices collected for imported goods are often denominated in foreign currencies. These currencies are converted to New Zealand dollars using the exchange rate at the time of pricing.

The New Zealand dollar appreciated against four key currencies of the country's five major trading partners in the December 2009 quarter, while it depreciated against the Australian dollar. The table below shows changes in the value of the New Zealand dollar in foreign currency denominations from the September 2009 quarter to the December 2009 quarter.

Price index developments

Statistics NZ began work in 2004 on a progressive redevelopment of PPIs. This involves re-evaluating the items that are priced and the weights that are applied to them. At this stage, the redevelopment applies only to output indexes.

The following indexes within the property and business services index (PPIQ.SUL) have been redeveloped and took effect from the December 2009 quarter:

• Scientific research & technical services
• Legal & accounting services.

For more information, please see the Technical notes.

Pricing financial services

The output of the banking industry consists of services provided by banks and other financial intermediaries that are both explicitly and implicitly charged for. Pricing explicit services (such as, bank account fees) provided by financial intermediaries is relatively straightforward. However, pricing the intermediation services provided by financial institutions that are implicitly charged for is more problematic. Due to the complex nature of these services, there are some limitations in the approach taken to measure these services. For more information, please see the Technical notes.

For technical information contact:
Lisa-Jane Thomsen or Suchindra Nanayakkara
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...
Producers Price Index: March 2010 quarter will be released on 18 May 2010.