Surge in electricity prices raises costs for New Zealand businesses

Costs for New Zealand businesses rose in the quarter to the end of September, driven by a surge in electricity prices, according to the latest producers price index (PPI) issued by the government statistics agency Thursday. The input price index representing prices paid by the gas and electricity industry soared by 19.3 percent in the quarter, according the Statistics New Zealand PPI, which measures changes in both prices received by producers and prices paid by them. The most significant rise in output prices also came from the electricity and gas supply industry, with the indes up 12.8 percent, following rises of 0.4 percent in the June quarter and 1. 9 percent in the March quarter, said a Statistics New Zealand commentary on the PPI. "The September 2011 quarter rise in the electricity and gas supply output index is the largest since a rise of 29.8 percent in the 2008 June quarter. The latest rise was influenced by higher prices for electricity, which reflected lower lake levels and higher spot-market rates," said the commentary. Lower farm-gate milk and milk powder prices helped to curb the overall rise in output prices those prices for goods and services produced in New Zealand to 0.2 percent in the quarter, said a statement from Statistics New Zealand. Input prices those paid for goods and services used by New Zealand producers rose by 0.6 percent. In the year to the end of September, overall output prices increased 3.5 percent, while input prices were up 4.7 percent, said the statement. Meanwhile, the capital goods price index (CGPI) was unchanged in the September quarter despite rises in all but one of the major indexes, said a separate statement from Statistics New Zealand. The increases were offset by a fall in the price index for plant, machinery, and equipment, which fell 1.5 percent in the quarter and was down 4.2 percent on an annual basis. The largest contributor to the fall was the price index for computer equipment, which fell 7.1 percent on a quarterly basis and 20.5 percent on an annual basis. The price for structural metal products in the plant machinery and equipment group also fell 13.5 percent in the quarter due to the high value of the New Zealand dollar and competition, said the statement. Civil construction prices rose 0.8 percent for the quarter and 5.3 percent on an annual basis, mainly due to increased road costs. The price index for construction of residential buildings rose 0.7 percent in the quarter, while prices for construction of non- residential buildings rose 0.4 percent. Overall the CGPI showed no change in the year to the end of September. The CGPI measures the change in the price of capital goods purchased by New Zealand producers of goods and services, such as businesses, government and households.