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ANZ Commodity Price Index - August

Data Flash (New Zealand)

Key Points The foreign currency price of New Zealand's commodity exports remained unchanged in August, with continued strength in food commodity prices offset by weakness in aluminium and forestry products.

In NZD terms, commodity prices recorded a 2.7% mom increase in July and were up 27.9% on last year. The index has reached a new all time high, and now stands some 12% above past cyclical peak levels.

Comment Latest trends in world commodity prices and the NZD suggest a further significant rise in the ANZ index in September, which is expected to translate into an 8% qoq increase in the official export price increase for Q3.

That would take the annual change in overall export prices to more than 17%. Domestic milk and meat prices have already increased as a result of this trend, with further pressure on domestic food and restaurant prices expected to follow.

Export price pressure will add to significant cost pressure from import prices, which are estimated to have increased in excess of 22% over the year to September. With NZD weakness likely to persist and oil price pressure unlikely to abate to a significant extent, two of the key assumption behind the RBNZ projection of inflation retreating quickly from a 2.9% peak in late 2000 are looking quite shaky. Deutsche Bank now forecasts CPI inflation to reach 3.5% in early 2001 and to stay above 3% for the remainder of that year.


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