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Rural Sector Shows Cash Flowing Into The Economy

Healthy, Diverse Growth Across The Rural Sector Shows Cash Flowing Into The Economy

INSIGHTS ABOUT THE NEWS - The robust health of the rural economy and its diversification has been highlighted by the latest ANZ commodity price index.

The index is 26% higher than a year ago, with dairy prices rebounding by a massive 50% in 12 months. However, there are also gains in forestry, horticulture and meat, which means the increases are spread across sectors, regions and businesses.

The ANZ Commodity Price Index is 26% higher than the same time last year. In NZ dollar terms, the index is 22.3% above the same time last year. The is just 5% below the all-time peak of March 2011.

That peak was driven almost entirely by dairy, but this year there is more broad-based strength. Horticulture rose 12.1% month on month. Besides the staples of kiwifruit and apples, exports of vegetables, avocados and honey have been soaring. NZ’s wine exports add another dimension.

Meat prices continued their strong performance. In world terms, meat prices are 13.6% above last year, though the weak British pound and euro have suppressed local returns. Wool prices are the one shadow on the bright picture, down 34% on the year.

The commodity price data for May should flow through to the merchandise terms of trade statistics. The latest, the March 2017 quarter, was up 5.1% to its highest level since 1973.

Terms of trade is a measure of the purchasing power of NZ’s exports abroad. A 5.1% rise in the March quarter means NZ can buy 5.1% more imports for the same amount of exports.

In the March 2017 quarter, export prices rose 8%, while import prices rose 2.7% mainly driven by oil. Changes in import and export prices have large impacts on the economy, directly through export revenue, and indirectly as import prices affect costs and prices within the country.

It may be dry data to some, but is a sign of cash flowing strongly into the economy.

Trans Tasman’s sister publication, The Main Report Farming Alert, is a weekly source providing you with in-depth news, analysis and opinion on NZ’s agriculture sectors.


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