Producers' output prices fell further in 4Q

New Zealand: producers' output prices fell further in 4Q

Click to enlarge

Click here for the full Note and disclosures.

The 4Q PPI numbers released in New Zealand this morning provided yet another piece of weak economic data. Today’s PPI print alone will have few implications for the RBNZ, but reaffirms the view that the RBNZ will sit on the policy sidelines in coming months. Medium term inflation pressures will become a growing concern for the RBNZ, but the domestic data has continued to fall on the downside of expectations, and Governor Bollard appears to want hard evidence that the economic recovery in New Zealand is sustainable before tightening policy.

Producer output prices fell for the fourth straight quarter in 4Q, slipping 0.4%q/q (J.P. Morgan: -0.5%, consensus: 0.4%). The biggest drag on output prices was the fall in the meat and meat products manufacturing index (-8.5%), which was the largest on record. The fall owed to lower livestock prices for beef and sheep. There was, however, an 18%q/q jump in dairy cattle farming, driven by higher forecast prices for farm-gate milk prices.

Input prices were up 0.3%q/q (J.P. Morgan -1.0%, consensus: 0.5%) in the fourth quarter, marking the first rise since 3Q08. The dairy product manufacturing index (+15.2%) made the most significant upward contribution to input prices thanks to higher whole milk prices at the farm-gate. A larger gain in input prices was, however, prevented by a decline in sheep and cattle prices.

Click to enlarge

© Scoop Media