5 February 2001
BULLETIN NO. 1/2001
Brief Comments on Statistics Recently Released
Consumer Price Index - December 2000
The CPI rose by 1.2% in the December quarter, lifting the annual rate of inflation to 4.0%. This is a significant
change from the annual rate of 1.3% recorded in the year to December 1999.
Statistics New Zealand noted that the annual increase of 4.0% was strongly influenced by increases in prices for
petrol, cigarettes and tobacco. Excluding these items, the annual increase was 2.5% — still almost double that the
previous December year.
International comparison of CPI inflation excluding housing costs
While the 2.5% increase would have been within the 0 - 3% band set for the Reserve Bank, it is still well above their
mid-point target of 1.5%. We are therefore unlikely to see the Reserve Bank easing monetary policy in the short term.
It would appear an important factor in the high level of price increases in the December quarter was the steady fall
in the exchange rate over the last four years.
Since peaking in early 1997, the Reserve Bank trade weighted exchange rate index (TWI) has fallen by 28% between March
1997 and December 2000. While the NZ$ fell by 39% against the US$ over this period, the fall against the A$ was just
10%.
The long term average for the TWI over the last 10 years was 59.5 for the period to December 2000. With a TWI of 49.6
in December 2000, 17% below the long term average, there was a limit beyond which importers and manufacturers could no
longer absorb the increase in imported input costs.
Earlier in the year, weak domestic market growth and strong import growth from low cost countries in Asia appeared to
limit the ability of importers and manufacturers to pass on the impact of these higher import costs.
The recent business opinion survey showed that domestic demand in the December quarter was stronger than expected,
allowing manufacturers to increase prices in the quarter. This is supported by data from the CPI showing an increase in
the number of commodities where price increases were recorded. (63.7% of items in the CPI).
The business opinion survey suggests there will be a similar level of price movement in the March quarter as
businesses continue to recover some of the higher costs faced due to the weak currency. While the recent appreciation in
the currency will help to reduce the level of price increases required, the current TWI (50.4 on 30 January) is still
15% below the longer term average.
Government housing rental reductions on 1 December 2000 and recent petrol price cuts will help to offset some of the
exchange impacts so the CPI is expected to decline quite rapidly from the current 4.0% peak.
The key issue for inflation trends over the next two years, however, will be the level of wage rises given by
businesses and the extent to which they respond to a higher CPI when setting wages levels.
A significant change over the last year has been the slowing in price increases for central and local government
charges. With a weighting of 9.08% in the CPI, the index for selected central and local government charges is an
important component in the CPI. Over the year to December 2000 the index rose by 2.3%.
Over the seven years from 1993, the selected central and local government charges rose by an average of 5.2%, while
the CPI averaged 2.1% over this period. If the selected central and local government charges had been excluded from the
CPI, the average annual increase would have been just 1.7%.
Source: Statistics NZ
Overseas Trade - Imports - December 2000
Total imports fell by 13.7% in the month of December, reflecting the boost to imports in December 1999 from the
importation of the second frigate. Imports for the 12 months ended December 2000, however, were still 13.4% up on the
previous year.
The 110% increase in the price of crude oil was a significant contributor to the rise in imports over the last 12
months. Crude oil imports have grown from $902 million in 1998 to $2,209 million in 2000.
Imports of processed fuels also grew strongly, reaching $526 million in the year to December 2000, 69% up on 1999.
The fall in the currency will also have boosted the value of imports last year. The average Reserve Bank TWI for 2000
was 51.4, 9.8% down on 1999.
The value of manufactured (BMS) imports was $26,578 million in the year to December 2000, 11.5% up on the previous
year ($2,528 million).
Origin of manufactured (BMS) imports
Year ended December 2000
The USA was a major source of this growth with an 18.5% ($811 million) increase in manufactured exports to that
country over 1999. Most of this increase was due to a $593 million (56%) increase in imports of electronic equipment.
This was mostly due to an increase in imports of communications equipment (telephone and mobile telephone equipment).
The exchange rate with the USA fell by 13.6% over this period.
Import growth was also very strong from China, with growth of in value of 34.6% ($483 million) from the previous year.
This was a significant acceleration in growth from the 21.3% increase recorded in 1999.
While imports of apparel (550 million) and footwear ($110 million) remain important categories, imports from China are
becoming more broadly based. Imports of electronic equipment, for example, increased by 48% to reach $280 million.
Other important import categories from China include metal products ($81 million), household appliances ($74 million)
and electrical equipment ($66 million).
The UK continues to lose market share in New Zealand, falling to the position of 6th largest supplier during the last
year. Germany overtook the UK, with imports from that country of $1,251 million, 20% up on the previous year.
Imports from the UK increased by just 4.6%, despite an 8% depreciation in the NZ$ against the UK£.
Australian manufacturers are also losing market share in a number of product categories because of strong competition
from Asia. Imports of Australian clothing declined by 16%, footwear imports fell 19%, household appliance imports were
down by 5% and furniture imports fell by 17%.
But, Australia continues to hold a dominant share of imports of processed foods and paper products, both categories
where Asian suppliers currently have a small share of the market. Imports of Australian processed foods increased by 11%
to reach $683 million, while imports of paper and paper products increased by 13% to reach $665 million.
Source: Statistics NZ
Retail Sales - November 2000
Retail sales in November 2000 totalled $3,837 million, an increase of 6.5% from November 1999. Excluding the motor
vehicle sector, the rate of growth was 5.8%.
Rolling quarterly average nominal growth rates have continued to slow and it is likely that volume growth will have
also slowed significantly. Data on retail prices in the December quarter will be released on Thursday and is likely to
show a high level of price increases in the quarter.
Monthly rate of change in retail sales
Percentage change from the same month previous year (quarterly trend)
One marked change in the sector data has been the rapid slowing in growth by department stores — including The
Warehouse. Their rolling quarterly average growth rate peaked at 16% in late 1999, but has now fallen below the overall
average for the retail sector.
Sales growth for the appliance retailing sector has also slowed rapidly, with the exchange rate rise reducing consumer
expectations of price increases.
Retail sales growth in the South Island remains strong, with growth of 10.7% in November. In contrast, the North
Island achieved just 5.1% growth with much weaker sales levels in the two main urban centres. Auckland region retail
sales increased by 4.9% while in Wellington the increase was just 2.4%.
Source: Statistics NZ
Building Consents Issued - December 2000 (need to flip to next page)
The value of residential building consents issued in December 2000 was $264 million, 20% down on December 1999. While
the value of non-residential consents was $214.6 million, 7% down on December 1999.
On a calendar year basis, the total value of residential building consents issued reached $3,640 million, 15% down on
1999. However, the value for 2000 was 8% up on the 1998 calendar year.
In contrast, total non-residential building consents valued $2,337 million for the 2000 calendar year, 5% up on 1999
but 2% down on 1998.
Source: Statistics NZ
ENDS