ANZ Commodity Price Index - September 2001

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Data Flash (New Zealand) NZ:

ANZ Commodity Price Index - September 2001

The foreign currency price of New Zealand's commodity exports rose 1.1% mom in September - the second consecutive rise. The result was driven largely by higher prices for lamb and beef as a result of tight supplies of imported product in Europe and the US. Higher prices were also recorded for venison, kiwifruit and apples. Of the remaining 12 commodities surveyed, six recorded lower prices (skins fell 7.3% mom) and six recorded no change.

Reflecting the depreciation of the NZD between late August and late September, the NZD price index increased by 3.4% mom in September. The index is 6.8% higher than a year earlier and over 50% higher than its cyclical low point in mid 1999.

Comment

Due to supply side factors, the world price of NZ's export commodities has continued to remain robust, buffering the NZ economy from the full impact of the markedly weaker global environment. Notwithstanding the further rise in September, in our view world prices are likely to commence a downtrend over the next 6 to 9 months. In the meantime, the continued resilience of commodity prices, combined with last Friday's much stronger than expected Q2 GDP outcome, adds to the weight of argument suggesting that the RBNZ will pass up the opportunity to take the OCR lower after tomorrow's review of policy settings. However, we would not rule out a 25bps cut, with the outlook for the global economy over the coming year having deteriorated substantially over the past month. This suggests that growth in the NZ economy will slow to below trend levels in 2002, helping to relieve current capacity constraints.

Darren Gibbs, Senior Economist, New Zealand

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