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ANZ Commodity Price Index - September

Data Flash (New Zealand)

ANZ Commodity Price Index - September

Key Points The foreign currency price of New Zealand's commodity exports rose by 0.5% in September, with continued strength in meat, dairy and aluminium prices. The index is now 11.2% higher than last year.

Due to the significant NZD depreciation between August and September, the modest monthly increase in world prices translated into a 6.5% rise in domestic currency prices. In NZD terms, commodity prices were up 34% on last year. The index now stands 52% above its cyclical low in May 1999 and has reached a new all time high.

Comment The usual correlation between the ANZ commodity price index and the official export price index suggests that overall export prices have risen by 7.5% qoq in Q3, taking the annual rate of increase up to 17%. Latest trends in world commodity prices and continued NZD weakness over the first half of October imply a further increase in the annual rise in export price inflation to above 20%. However, that is being offset by import price inflation of a similar magnitude. A recovery in the terms of trade relies on a marked retreat in oil prices. Rising export prices for meat and dairy products are starting to have a significant effect on the food price component of the CPI, adding to pressure generated by high import prices. Our latest forecast is for annual CPI inflation to reach 3.7% by the middle of next year.

Ulf Schoefisch, Chief Economist, New Zealand (64) 9 351 1375

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