Goods and service production costs fall

Last updated 11:49 19/11/2012

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Lower wholesale electricity prices and a drop in milk and crude oil prices are pushing down the costs of goods goods and services used by New Zealand producers.

But the prices they received are down by almost as much.

During the September quarter, prices received by producers, as measured by the output producers price index (PPI), fell 0.9 per cent, Statistics New Zealand said today.

The input PPI, representing the prices of goods and services used by New Zealand producers, fell 1.0 percent.

"Lower electricity generation prices and milk prices contributed to both the output and input PPI falls in the September 2012 quarter," prices manager Chris Pike said. "Lower imported crude oil prices also influenced the fall in the input PPI."

In the September 2012 quarter, the electricity and gas supply output price index was down 11.5 per cent while the input price index was down 15.0 per cent. These decreases reflect lower generation prices that were due to higher hydro-storage and spot-market conditions.

Hydro lake storage was lower than usual earlier this year, but is now running well above average and that has pushed wholesale prices down. Big power user, the Tiwai Point aluminium smelter has also cut back on production, reducing its demand for electricity.

The output price index for dairy product manufacturing fell 10.0 per cent, reflecting lower prices for whole and skim milk powder. Dairy farmers received lower farm-gate milk prices, which resulted in lower dairy cattle farming output prices (down 9.4 per cent).

Petroleum manufacturers paid less for imported crude oil. The input price index for the petroleum and coal product manufacturing industry fell 9.3 per cent. This is the largest quarterly fall since a 28.6 per cent fall in the March 2009 quarter.

In the year to the September 2012 quarter, the output PPI was down 0.6 per cent, while the input PPI was up 0.3 per cent.

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