Electricity and dairy nudge up prices 

Electricity and dairy have pushed up producers' prices.

New figures from Statistics New Zealand show output prices rose by 1.8% while input prices rose 2.3%.

The main driver was the dairy product manufacturing index, while the electricity generation and supply index was the most significant contributor to the rise of input prices.

In Producers Price Index outputs, the dairy product manufacturing outputs index rose 13.7% in the March 2008 quarter, driven mainly by higher export prices of milk powder, cheese and butter.

In the 12 months to march 2008 the dairy product manufacturing index rose 50.4% - the highest ever recorded annual increase since the series began in June 1994 quarter.

This compares with a fall of 3.4% in the year to the March 2007 quarter.

ASB chief economist Nick Tuffey says much of the increases have come through as a result of high dairy commodity prices, high oil prices, and electricity generation constraints.

Dairy processors received 14% more for their finished products - and higher wholesale electricity prices over the dry start to the year boosted generators' selling prices (16.4%) and electricity retailers' costs (retailers faced a 42% increase).

High oil prices boosted petroleum input and output prices.

Transport input costs were also up 3.55% overall.

Tuffey says the commodity-related impacts on food and petrol prices are already highly visible, but big boosts to wholesale electricity prices will not be passed on at a retail level.

However, ongoing rises in retail electricity prices will continue to outstrip the rate of inflation.

Tuffey says the PPIs reflect the general impact of higher input prices and an associated margin squeeze, and he expects there will continue to be very high inflation in the short term.