Lower lake levels pushed the cost of electricity up significantly for both for power generators and users during the June quarter.

The producer price index, measured by Statistics New Zealand, shows wholesale prices charged by the gas and electricity supply industry jumped 10.7 per cent during the quarter and 27.3 per cent over the June year.

But lower hydro-storage levels also meant the industry paid more in costs, up 8.2 per cent during the quarter. Its annual costs were up 34.5 per cent, the highest yearly increase since June 2008.

Overall business costs outpaced income. The input PPI, or price of goods and services paid by producers, rose 0.6 per cent during the June quarter.

The output index, which measures the prices received by producers, rose 0.3 per cent.

Economic research house Infometrics said the results showed businesses were finding it hard to raise their profit margins.

"Although the high New Zealand dollar and falling commodity prices have helped moderate input price growth over the past year, firms are finding it tough to lift prices in a backdrop of weak demand conditions."

Farmer incomes and dairy manufacturing both felt the effects of lower farm-gate milk prices.

The output price index for dairy cattle farmers fell 6.9 per cent during the quarter, while input costs for dairy manufacturers fell 4.7 per cent.

But Statistics NZ spokesman Chris Pike said it was important to remember the quarter straddled two milk seasons and so the index reflected both the old and new Fonterra payout prices.

After electricity, the second-largest upward pressure on input prices was the price of imported crude and oil and refining fees, up 7.5 per cent.

For the year to June, the output PPI was up 0.5 percent, and the input PPI was up 1.9 per cent.

- © Fairfax NZ News