Australia’s producer price index at the final stage of production rose 0.3% in the June quarter, for an annual rise of 1.0%, much less than market forecasts.
Figures from the Australian Bureau of Statistics said yesterday revealed that growth in the final stage of the PPI slowed sharply from the 1.0% rise in the March quarter.
Economists had forecast a rise of 0.8% in the final stage PPI for the June quarter and 1.5% for the year.
The news is likely to help the RBA focus solely on tomorrow’s consumer price index for the June quarter and 2009-10.
There’s no real lead for the CPI from the PPI figures from the ABS, except to say that price pressures for business were mixed in the quarter.
The ABS reported that in the June quarter, the PPI at the intermediate stage, rose 0.9% (1.2% in the March quarter), while at the preliminary stage it rose 1.5 % (1.0% in the March quarter).
Over the year to June, at the intermediate stage the PPI rose 0.6% and at the preliminary stage it rose 1.2%. (The figures for the year to March were negative because of the impact of weak June quarter of 2009 in that 12 month comparison.)
But the figures do show some easing in domestic price pressures for producers at all levels of the index, which is something the RBA will focus on.
According to the ABS analysis there were several interesting points in the composition of the final stage PPI.
"During the June quarter 2010, the prices paid by manufacturers for material inputs increased by 2.5%, while the prices they received for their outputs increased by 1.2%.
"Through the year to June quarter 2010, prices of material inputs increased by 0.6%, while prices for outputs increased by 2.5%."
So the June quarter saw a sharp compression of selling margins by manufacturers, which would have been offset by wider margins earlier in the year that saw selling prices rise faster than the cost of inputs.
"The increase of 0.3% in the final (Stage 3) index reflected a rise of 0.4% in the price of domestically produced items and a fall of 0.1% in the price of imported items," the ABS said.
"The domestic component recorded price rises for building construction (+0.3%), real estate agents (+3.3%) and tobacco product manufacturing (+8.0%).
"Partly offsetting these rises were decreases in the prices of meat and meat product manufacturing (-4.3%) and accommodation (-5.4%).
"The imports component decreased due to price falls for motor vehicle and part manufacturing (-2.8%), industrial machinery and equipment manufacturing (-2.0%) and fruit and vegetable processing (-9.3%).
"Partly offsetting these falls were increases in the prices of dairy product manufacturing (+35.2%), photographic and scientific equipment manufacturing (+6.4%) and other food manufacturing (+2.5%)."
The sharp rise in dairy manufacturing prices stands out. World dairy prices have been firming for the past few months.
But on the whole there’s nothing there that strike the RBA as carrying warning signals.
If anything, the contraction in selling margins in the June quarter could be seen as a positive.
