KEY POINTS:
Price falls in primary products were the main cause of a 0.2 per cent fall in the Producers Price Index (PPI) output index in the March quarter.
Input prices for the three months were down 1.6 per cent, with lower prices for crude oil and domestic natural gas
and the appreciating New Zealand dollar the most significant contributors, Statistics New Zealand (SNZ) said today.
In the year to the March 2007 quarter, both the outputs index and the inputs index were up 2.7 per cent.
A key factor in the March quarter output index fall was lower prices for vegetables due to greater supply, particularly for tomatoes, potatoes and cabbages.
The vegetable price fall contributed to an 11.5 per cent drop in the horticulture and fruit growing outputs index, and an 11.4 per cent fall in the livestock and cropping farming index. Both indices last fell in the March 2006 quarter.
Electricity generation and supply output prices also fell in the latest quarter, dropping 3.1 per cent, as a result of lower spot market generation prices, and falls in fuel and gas prices, SNZ said.
The electricity index was fallen for the past four quarters.
Partly offsetting the overall fall in output prices was a 5.1 per cent rise in forestry and logging industry prices, mainly due to higher prices for exported log prices due to higher international demand.
From the March 2006 to March 2007 quarter, forestry and logging output prices rose 16.1 per cent.
Among input prices, the wholesale trade index fell 8 per cent in the March quarter, the first fall by the index since the March 2004 quarter and the largest fall since the data series started in 1994.
Lower prices in the mineral, metal and chemical wholesaling sector, attributable to the fall of crude oil prices and lower domestic natural gas prices, were the main drivers for the decrease, SNZ said.
The second largest downward contributor to the PPI inputs index was a 12.6 per cent fall in the meat and meat product manufacturing index, the largest fall since the start of the series in 1994.
The construction inputs index continued to rise, up 1.1 per cent, partly due to higher steel pipe prices.
Bank of New Zealand senior economist Craig Ebert said the fall in the PPI stemmed from three basic factors -- petrol prices, agricultural output prices and the currency.
"It does say that you've got alleviating price pressures from those factors but it doesn't really say anything more than that."
Deutsche Bank chief economist Darren Gibbs said some of the things that were soft in the March quarter had since bounced back, such as crude oil prices.
"It doesn't change my view that there is a core of inflation running through the economy that's not driven by the sorts of things the PPI captures, such as the heavy domination of imported material."
Westpac economist Doug Steel said he would not read too much into today's figures, with the PPI "thrown around a lot by commodity prices".
But some possible good news was the decline in the rate of construction industry output price growth, which had been a source of inflationary pressure.
- NZPA
