- Raiko Shareef, currency strategist at Bank of New Zealand
New Zealand producer prices increased at a solid pace in the third quarter, driven by a rise in dairy and meat prices as the weakness in the New Zealand Dollar boosted export prices, signalling inflationary pressures may be picking up. Producer prices climbed for the first time in over a year, with the output PPI, which tracks the change in prices of goods leaving the factory gate, surging 1.3% in the three-month period ended September. The increase followed a 0.2% decline in the preceding quarter, Statistics New Zealand said. Economists, however, had predicted a modest 0.2% increase in the reported period. At the same time, the input PPI, which measure the change in production costs, advanced 1.6% in the third quarter, after decreasing 0.3% in the June quarter. Statistics New Zealand said that the depreciation of the Kiwi Dollar influenced PPI prices.
The increase in producer prices last quarter indicates inflationary pressures are starting to build again, which will come as a relief to the Reserve Bank of New Zealand. Consumer prices showed little growth over the last two years as the nation's economy started to lose steam in 2014 and global oil prices plunged sharply in mid-2014. The consumer inflation has not reached the RBNZ's 2% target midpoint in four years, despite three interest rate cuts since June.
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