Producer price index (PPI) changes get less media attention the consumer price index (CPI) but they are just as interesting. There are two PPIs: one for output prices and one for input prices. These measure weighted average changes in the prices of goods and services produced (outputs) and used (inputs) by businesses in specific industries. This data helps us to understand the cost pressures that different industries are facing, and how they have changed their output prices in response to cost changes or other factors. Stats NZ publishes PPI data every quarter for a range of industries (input and output price indexes are published for most but not all of these).
Looking across industries, we can see some interesting differences in patterns of input and output price changes. Using Observable, I built a simple explorer of the NZ PPI data that focuses on comparing changes in output prices with changes in input prices across industries.
One thing to note is that this data just tells us about changes in prices, not levels of prices. So from the PPI data we can’t reach any conclusions about whether prices are reasonable, high, or low given the costs that businesess face. With that in mind, here are some examples:
Supermarket, Grocery Stores and Specialised Food Retailing
For the most part, output price changes appear to have tracked input price changes fairly closely. One interesting period is around 2009, when input cost growth reduced from around 8% per year to close to zero while output prices (i.e. retail prices charged to shoppers) continued to grow for a while.
Residential Building Construction
Residential building has seen fairly steady increase in input and output prices over the past 20 years, with output prices tending to increase faster than input prices, except in the post-GFC period from around 2008 to 2012. Since mid-2021 there have been sustained cost increases, but output prices have increased even faster.
Non-Residential Building Construction
Non-residential construction has also seen the same cost pressures since mid-2021, but unlike residential construction, output prices have actually increased more slowly than input prices. Over the longer term, there is a similar pattern to residential construction.
Electricity and Gas Supply
This industry has had some pretty big swings in input cost changes, particularly between 2000 and 2010. On this chart you can clearly see some ‘smoothing’ of cost changes into output prices – when costs are rising, output prices tended to rise by less, and when costs are falling, output prices also tended to fall by less.
Dairy Cattle Farming
Dairy farmers have seen some pretty big swings in output prices, particularly during the decade from 2008 to 2018, while input prices have increased at a relatively steady rate. Since 2018, there seems to be less volatility but it’s not clear if this is a permanent shift.
Legal and Accounting Services
This is one of the few industries where output prices have consistently grown faster than input prices.
Petroleum and Coal Product Manufacturing
This industry is obviously affected by big swings in its input prices, which for the most part are reflected in output prices. Over the most recent year (to June 2022), output prices have increased faster than input prices.
Explore more
Head over to my page on Observable where you can view similar charts for many other industries.
If you’re interested in New Zealand price index data in general, you might also want to look at my New Zealand price index tracker.