1301.0 - Year Book Australia, 2009–10  
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Contents >> Prices >> Producer price indexes (PPI)

PRODUCER PRICE INDEXES (PPI)

Producer price indexes measure changes in the prices either received or paid by producers of commodities and providers of services. In Australia they generally relate to prices for goods and services as they affect businesses, for example, the price of goods used as inputs to manufacturing and the price of services provided by the services industries. This contrasts with the CPI which measures changes in the retail prices paid by consumers, as explained earlier in this chapter. For more information about producer price indexes, see Producer and International Trade Price Indexes: Concepts, Sources and Methods, 2006 (6429.0).


Stage of production indexes

The stage of production (SOP) producer price indexes are compiled using the stage of production concept, in which flows of commodities are categorised according to their economic destination on a sequential basis along the production chain. The basis for the categorisation of commodities is the 1996-97 Australian Input-Output (I-O) tables (see the National accounts chapter). The principal categorisation is between final commodities (i.e. commodities destined for final consumption, capital formation or export) and those commodities that will be processed further (referred to as 'non-final' commodities).

The initial breakdown of commodity flows into final and non-final represents a useful economic dissection of producers' transactions. However, the non-final commodities can flow into the production of either final commodities or other non-final commodities. Therefore, to aid analysis, the non-final commodity flows have been divided on a sequential basis between stage 1 (or preliminary) commodities and stage 2 (or intermediate) commodities. This approach results in three separate stages of production.

In order to avoid multiple counting of transactions, the three stages are not aggregated.

Under this framework, preliminary (stage 1) commodities are used in the production of intermediate (stage 2) commodities which, in turn, flow into the production of final (stage 3) commodities.

The framework allows for analyses of price change as commodities flow through production processes. Price changes for earlier stages of production may be indicators of possible future price changes for later stages.

The same commodity can be assigned to any of the stages of production depending on its destination. For example, bauxite is a preliminary good when it is used to produce alumina that is in turn used in the production of aluminium by an Australian producer. Where the alumina is exported the bauxite used in its production will be considered an intermediate good. Where the bauxite is exported it is deemed to be a final (stage 3) good.

Market transactions approach

The ABS has adopted a market transactions approach in disaggregating commodity supply into the various production stages. Under this approach, the individual transactions in a given commodity are assigned to the relevant stage, based on identification of the market(s) in which that commodity is transacted, which in turn is determined by the usage pattern of that commodity. A particular commodity, within the index classification system, can be assigned to more than one stage of production, on the basis of its usage pattern as identified in the I-O tables.

Index coverage

The SOP indexes are compiled on a Australian and New Zealand Standard Industrial Classification (ANZSIC) 1993 basis. In concept, the scope of the SOP indexes is economy-wide, relating to the output of all the goods and services industries. However, there are limits on the availability of price indexes for service industries, and coverage is currently restricted to the output of the accommodation, transport (freight) and storage, and property and business services sectors. Similarly, coverage of the construction sector is confined to indexes for the output of the following industries: house construction, other residential building construction, non-residential building construction, and road and bridge construction. Coverage of the stage of production indexes will be progressively extended as additional service and construction industry collections are established. Table 29.16 shows stage of production producer price indexes.

29.16 STAGE OF PRODUCTION PRICE INDEXES (a), By stage and source
Preliminary
Intermediate
Final (excl. exports)
Domestic
Imports
Total
Domestic
Imports
Total
Domestic
Imports
Total
2004-05
121.1
115.4
120.2
119.8
104.4
117.5
124.1
84.6
116.1
2005-06
129.5
129.5
129.4
126.7
112.6
124.7
129.5
84.5
120.4
2006-07
137.0
132.4
136.2
133.9
114.5
131.0
134.8
82.5
124.2
2007-08
144.5
141.9
144.0
141.3
117.4
137.8
141.6
78.8
128.7
2008-09
153.8
154.6
153.7
147.9
130.9
145.4
146.3
88.9
134.5
(a) Reference base year is 1998-99 = 100.0
Source: ABS Producer Price Indexes, Australia (6427.0).



Manufacturing industries indexes

The manufacturing output producer price indexes relate to selected products (i.e. articles produced) primary to the manufacturing industry, while the manufacturing input producer price indexes relate to materials used by establishments classified to the manufacturing industry. These indexes are compiled on the basis of the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition.

Gross sector basis

Prior to the September quarter 2009, the manufacturing indexes were constructed on a net sector basis with intra-sector transactions netted out. The scope of the output indexes was therefore restricted to transactions in produced articles primary to the defined sector of the Australian manufacturing industry that were sold or transferred to domestic establishments outside that sector, or used as capital equipment, or exported. The scope of the input indexes related to transactions in materials used in defined sectors of the Australian manufacturing industry that were produced by domestic establishments outside that sector, or imported.

From the September quarter 2009, the manufacturing indexes are constructed on a gross sector basis. The scope of the output indexes includes transactions in produced articles primary to the defined sector of Australian manufacturing industries that are sold or transferred to domestic establishments within or outside that sector for further processing, or used as capital equipment, or exported. Articles are defined as all products primary to the manufacturing industry excluding commission production products and general government consumption of fixed capital. The scope of the input indexes relates to transactions in materials used by establishments classified to the manufacturing industry. Materials are defined as products primary to ANZSIC 2006 Divisions A - D (i.e. agriculture, forestry, fishing, mining, manufacturing and electricity, gas, water and waste services) that are consumed by establishments classified to the manufacturing industry.

Price indexes of articles produced by manufacturing industries

The manufacturing division output index, from the September quarter 2009 onwards, measures changes in prices of articles that are primary to ANZSIC 2006 Division C - Manufacturing, that are sold or transferred to domestic establishments within or outside the manufacturing division for further processing, intermediate use or used as capital equipment or exported.

The price of produced articles primary to the manufacturing industry, as measured by the manufacturing division output index, increased by 20.6% between 2004-05 and 2008-09 (table 29.17).

The output indexes for articles primary to manufacturing subdivisions measure transactions within and outside the subdivision or group. Prior to September quarter 2009 these series were constructed on a net sector basis. They excluded intermediate transactions in produced articles primary to the specific manufacturing subdivision or group that were sold or transferred within that subdivision or group for further processing.

In 2008-09, the largest increase in the price of produced articles primary to the manufacturing division was in fabricated metal product manufacturing at 14.1%, while prices of petroleum and coal products fell by 10.0% (table 29.18).

29.17 MANUFACTURING DIVISION OUTPUT INDEXES(a)(b)
Manufacturing division
2004-05
139.3
2005-06
149.4
2006-07
156.4
2007-08
164.2
2008-09
168.0
(a) Reference base year is 1989-90 = 100.0
(b) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition.
Source: ABS Producer Price Indexes, Australia (6427.0).

29.18 PRICE INDEXES OF ARTICLES PRODUCED BY MANUFACTURING INDUSTRY(a)
2004-05
2007-08
2008-09
Change from 2004-05 to 2008-09
Change from 2007-08 to 2008-09
ANZSIC Subdivision(b)
index no.
index no.
index no.
%
%
Food product manufacturing(c)
102.4
115.2
126.0
23.0
9.4
Beverage and tobacco product manufacturing(c)
108.7
120.9
128.4
18.1
6.2
Textile, leather, clothing and footwear manufacturing(c)
102.7
108.1
109.8
6.9
1.6
Wood product manufacturing
140.5
157.4
167.7
19.4
6.5
Pulp, paper and converted paper product manufacturing
117.4
121.2
123.3
5.0
1.7
Printing (including the reproduction of recorded media)(c)
92.5
90.2
93.6
1.2
3.8
Petroleum and coal product manufacturing
226.8
370.3
333.3
47.0
-10.0
Basic chemical and chemical product manufacturing
120.8
131.6
148.5
22.9
12.8
Polymer product and rubber product manufacturing
130.8
146.6
149.9
14.6
2.3
Non-metallic mineral product manufacturing
131.2
140.6
149.0
13.6
6.0
Primary metal and metal product manufacturing
129.4
176.8
169.9
31.3
-3.9
Fabricated metal product manufacturing
133.6
149.8
170.9
27.9
14.1
Transport equipment manufacturing
126.1
128.0
129.5
2.7
1.2
Machinery and equipment manufacturing
115.9
125.9
130.4
12.5
3.6
Furniture and other manufacturing
131.6
143.9
156.9
19.2
9.0
(a) Reference base year is 1989-90=100.0 unless otherwise specified.
(b) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition.
(c) Reference base year is 2001-02 = 100.0.
Source: ABS Producer Price Indexes, Australia (6427.0).


Price indexes of materials used in manufacturing industries

The manufacturing division input index (table 29.19), from the September quarter 2009 onwards, measures changes in prices of materials used in ANZSIC 2006 Division C - Manufacturing, that have been purchased or transferred in from domestic establishments within or outside the manufacturing division, or imported. Prior to the September quarter 2009 this index was constructed on a net sector basis.

The price of materials used in manufacturing, as measured by the manufacturing division input index, increased by 37.0% between 2004-05 and 2008-09, driven mainly by increases in the price of domestic materials. In 2008-09, the price of domestic materials was 39.1% higher than the price in 2004-05, while the price of imported materials had risen by 27.6% (table 29.19).

The input indexes for materials used in manufacturing measure input purchases or transfers within and outside the subdivision. Prior to September quarter 2009 they were constructed on a net sector basis. They excluded intermediate transactions in materials used in a specific manufacturing subdivision or group that were sold or transferred within that subdivision or group for further processing.

From 2007-08 to 2008-09 the price of materials used in manufacturing, as measured by the manufacturing division input index, increased by 6%. Increases occurred for the materials used in the majority of constituent manufacturing industries. The largest increase in price was for the materials used in basic chemical and chemical product manufacturing (23.5%), primary metal product manufacturing (17.9%) and non-metallic mineral product manufacturing (11.8%) industries (table 29.20).

29.19 MANUFACTURING DIVISION INPUT INDEX(a)(b)
Materials used
Domestic
Imported
Total
2004-05
149.7
120.8
137.1
2005-06
172.3
127.2
154.5
2006-07
183.2
132.0
162.2
2007-08
205.4
133.3
177.1
2008-09
208.3
154.1
187.8
(a) Reference base year is 1989-90 = 100.0
(b) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition
Source: ABS Producer Price Indexes, Australia (6427.0).

29.20 PRICE INDEX OF MATERIALS USED IN MANUFACTURING INDUSTRIES(a)
2004-05
2007-08
2008-09
Change from 2004-05 to 2008-09
Change from 2007-08 to 2008-09
ANZSIC Subdivision
index no.
index no.
index no.
%
%
Food product manufacturing(b)
103.2
123.6
124.7
20.8
0.9
Beverage and tobacco product manufacturing(b)
95.8
95.0
101.8
6.3
7.2
Textile, leather, clothing and footwear manufacturing(b)
94.3
98.7
98.1
4.0
-0.6
Wood product manufacturing
126.6
146.1
160.7
26.9
10.0
Pulp, paper and converted paper product manufacturing
103.1
113.3
123.8
20.1
9.3
Printing (including the reproduction of recorded media)(b)
94.2
96.5
100.2
6.4
3.8
Petroleum and coal product manufacturing
216.9
352.7
342.0
57.7
-3.0
Basic chemical and chemical product manufacturing
121.3
148.2
183.0
50.9
23.5
Polymer product and rubber product manufacturing
134.4
148.9
166.0
23.5
11.5
Non-metallic mineral product manufacturing
135.9
147.7
165.2
21.6
11.8
Primary metal and metal product manufacturing
116.0
185.4
218.5
88.4
17.9
Fabricated metal product manufacturing
127.4
151.9
162.8
27.8
7.2
Transport equipment manufacturing
126.2
136.0
151.3
19.9
11.3
Machinery and equipment manufacturing
117.1
137.7
149.7
27.8
8.7
Furniture and other manufacturing
132.5
150.5
166.5
25.7
10.6
(a) Reference base year is 1989-90 = 100.0 unless otherwise specified.
(b) Reference base year is 2001-02 = 100.0
Source: ABS Producer Price Indexes, Australia (6427.0).



Construction industries indexes

Price index of the outputs primary to the building construction subdivision and selected construction industry classes

The construction producer price indexes relate to outputs primary to ANZSIC 2006 Division E - Construction.

The construction outputs price indexes measure changes in prices of the outputs primary to selected construction industry classes. Presented in table 29.21 is the ANZSIC 2006 Subdivision (30) - Building construction which consists of three classes: House construction (3011); Other residential building construction (3019); and Non-residential building construction (3020). Outputs primary to the class Road and bridge construction (3101) are also presented in this table.

29.21 PRICE INDEX OF THE OUTPUT OF THE GENERAL CONSTRUCTION INDUSTRY(a)
ANZSIC Subdivision and Class(b)
2004-05
2005-06
2006-07
2007-08
2008-09
Building construction
130.6
136.8
142.5
150.4
155.0
House construction
130.6
136.1
139.7
146.8
152.3
Other residential building construction
132.1
138.7
144.8
152.3
155.7
Non-residential building construction
131.3
138.2
146.2
155.4
159.0
Road and bridge construction
125.8
133.2
139.9
147.5
157.0
(a) Reference base year is 1998-99 = 100.0
(b) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition.
Source: ABS Producer Price Indexes, Australia (6427.0).


Price index of materials used in house building

The construction input indexes measure changes in prices of Materials used in house building (table 29.22). This table relates to the statistical division for each state capital city and the weighted average of the six capital cities. The ANZSIC class House construction (3011) approximates the industry scope of the index.

29.22 PRICE INDEX OF MATERIALS USED IN HOUSE BUILDING(a)(b)
Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Weighted average of six capital cities
2004-05
146.6
134.6
137.3
143.4
131.1
148.0
138.8
2005-06
149.5
137.0
140.8
145.8
136.0
151.0
142.0
2006-07
153.3
141.7
145.3
149.9
144.0
156.2
147.0
2007-08
157.1
146.1
151.4
153.9
150.7
163.7
152.1
2008-09
166.0
154.7
160.6
168.8
163.0
175.0
162.0
(a) Reference base year is 1998-99 = 100.0
(b) The seperate city indexes measure price movement within each city individually. They do not compare price levels between cities.
Source: ABS Producer Price Indexes, Australia (6427.0).



Service industries price indexes

The currently available service industry indexes represent the results to date of a program to progressively extend the scope of the producer price indexes into the service sectors of the economy. These indexes are important sources of data for the SOP indexes. The service industry indexes measure changes in prices of services primarily defined to selected ANZSIC 2006 industries, excluding general government consumption of fixed capital.

New index series created as part of the implementation of ANZSIC 2006 in the September quarter 2009 have been backcast to September quarter 2001. These index numbers are calculated on the reference base 2001-02 = 100.0. Continuing index number series are calculated on the reference base 1998-99= 100.0. Table 19.23 presents index numbers for selected output of services primary to the following ANZSIC 2006 divisions; Division I - Transport, postal and warehousing; Division J - Information media and telecommunications; Division L - Rental, hiring and real estate services; Division M - Professional, scientific and technical services; Division N - Administrative and support services; Division O - Public administration and safety and Division S - Other services.
29.23 PRICE INDEX OF SELECTED OUTPUT OF SERVICE INDUSTRIES(a)
ANZSIC(b)
2004-05
2005-06
2006-07
2007-08
2008-09
Division I(c)
Road freight transport
115.8
123.0
126.9
131.8
141.1
Rail freight transport
96.7
98.0
100.1
102.0
111.0
Water freight transport
114.3
111.2
110.6
108.5
120.0
Pipeline transport
107.8
107.5
107.7
112.0
126.3
Postal and courier pick-up and delivery services(d)
105.9
108.3
110.4
111.6
116.3
Water transport support services
100.3
100.9
107.9
108.9
112.2
Airport operations and other air transport support services
97.0
100.8
99.8
102.7
103.2
Customs agency services
107.1
109.4
110.4
111.4
114.3
Warehousing and storage services
107.6
113.6
118.2
122.8
129.5
Division J(e)
Newspaper, periodical, book and directory publishing(d)
109.1
111.7
115.1
117.7
120.9
Data processing, web hosting and electronic information storage services(d)
102.3
106.9
106.4
105.8
106.1
Division L(f)
Rental and hiring services (except real estate)
106.9
109.2
112.7
115.6
115.8
Non-residential property operators
115.6
122.3
131.8
146.2
152.0
Real estate services
175.7
186.8
213.0
245.0
253.2
Division M(g)
Scientific research services
117.4
124.1
129.5
131.6
137.8
Architectural, engineering and technical services(d)
114.3
122.1
130.8
142.5
152.0
Legal and accounting services
129.0
136.9
143.2
148.5
155.0
Market research and statistical services(d)
111.7
117.4
123.5
127.3
132.7
Management advice and related consulting services(d)
103.7
105.2
110.7
112.3
114.5
Computer system design and related services(d)
104.9
108.1
112.2
114.6
118.9
Division N(h)
Employment services(d)
117.0
122.4
128.4
133.2
136.3
Other administrative services(d)
108.4
110.8
116.6
120.9
125.3
Building cleaning, pest control and gardening services(d)
109.4
111.0
115.3
118.6
123.2
Division O(i)
Investigation and security services
114.8
116.4
121.8
125.8
129.0
Division S(j)
Parking services
147.1
153.9
170.1
190.0
206.4
(a) Reference base year is 1998-99 = 100.0 unless otherwise specified
(b) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition
(c) Transport, postal and warehousing
(d) Reference base year is 2001-02 = 100.0
(e) Information media and telecommunications
(f) Rental, hiring and real estate services
(g) Professional, scientific and technical services
(h) Administrative and support services
(i) Public administration and safety
(j) Other services
Source: ABS Producer Price Indexes, Australia (6427.0).







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