Australia’s Producer Price Index Shows 1.8% Rise in Final Demand

Australia’s latest Producer Price Indexes (PPIs) for September 2023 reveal a 1.8% increase in final demand (excluding exports) for the quarter. The PPI data encompasses various sectors, including mining, manufacturing, construction, and services industries.

Key Highlights:

  • Final demand (excluding exports) rose by 1.8% in the September quarter.
  • Over the past twelve months, final demand recorded a significant increase of 3.8%.

Understanding the Figures:

  • Quarterly Overview: The 1.8% increase in final demand this quarter was driven by upward trends in most industries. Notable contributors to this growth include higher prices for construction outputs, petroleum, and energy. Services industries, particularly health and child care services, also experienced broad-based price increases. Factors such as new financial year contract negotiations, indexation clauses, annual wage cost reviews, and rising operating costs contributed to the overall price rises across services sectors.
  • Main Contributors to Growth:
    • Building Construction: Output of building construction increased by 1.3% during the September quarter, attributed to persistent skilled labor shortages and heightened manufacturing costs for materials.
    • Petroleum Refining and Fuel Manufacturing: Notably, this sector saw a substantial rise of 10.7%, influenced by robust global crude oil prices following reduced global supply and a depreciating exchange rate.
    • Utilities (Electricity, Gas, Water): The combined sector of electricity supply, gas supply, and water supply, sewerage, and drainage services experienced a growth of 5.9%. This increase was driven by supply and usage charge hikes following annual reviews, reflecting the rise in wholesale electricity costs.

Implications and Outlook: The quarterly growth in final demand indicates resilience and activity across various economic sectors. The rise in construction and energy-related industries suggests ongoing challenges such as skilled labor shortages and global market dynamics. The data provides valuable insights for policymakers and businesses navigating the economic landscape.