Big falls in producers' input and output prices have caught economists by surprise in the March quarter.
Producers' input prices, as measured in the Producers Price Index (PPI), fell 2.5 per cent in the three month period, the largest decline since the series began in 1977. Output prices fell 1.4
per cent.
The median predictions in a Reuters poll of economists was for a 0.2 per cent fall in input prices and a 0.3 per cent rise in output prices.
ANZ-National Bank senior economist Khoon Goh said the figures suggested firms were not passing on fully lower input prices on to output prices, indicating margins might have improved somewhat.
UBS senior economist Robin Clements also saw positive indications for margins, pointing to the faster fall in input prices than in output prices.
In the current environment that was probably a good thing, he said.
The inflationary burst caused previously by commodity prices was unwinding, which was helpful.
Lower prices for imported crude oil and for fuel made major contributions to the fall in input prices, while lower prices in the dairy product manufacturing index drove down output prices.
The lower prices for imported crude oil contributed to a 12.7 per cent fall in the wholesale trade inputs index, Statistics New Zealand said publishing the data today.
The 14.4 per cent fall in the air transport index, with lower prices for aviation fuel a major factor, also made a significant contribution to the overall fall in input prices.
The dairy product manufacturing outputs index fell 24.3 per cent in the March quarter, following a 19.2 per cent rise in the December quarter.
The latest fall is the largest since the series began in the June 1994 quarter. Lower export prices for dairy products such as skim milk powder, butter and cheese were the main drivers of the fall.
In the year to the March 2009 quarter, the PPI inputs index rose 4.7 per cent and the outputs index rose 6.5 per cent.
- NZPA
