Data Flash (New Zealand) NZ:
ANZ Commodity Price Index - August 2001
Following two consecutive declines, the foreign currency price of New Zealand's commodity exports rose 0.5% mom in
August. The result was driven largely by higher prices for beef. Higher prices were also recorded for skins and venison.
10 of the 17 commodities surveyed were either constant or higher during the month.
Reflecting the appreciation of the NZD between July and August, especially against the USD, the NZD price index declined
by 4.1% mom in August. However, the index remains 50% higher than its cyclical low point in 1999.
The world price of New Zealand's export commodities has remained robust over the past year, helping to buffer the New
Zealand economy from the full impact of the marked weaker global environment. As the chart below illustrates, growth in
real gross domestic income - GDP adjusted to capture the impact of the terms of trade on purchasing power - is running
over 1% stronger than growth in official GDP. This helps to explain the relative buoyancy of consumer spending and the
recovery in the housing market.
Notwithstanding the small rise in August, in our view world prices are likely to remain on a downtrend over the next 6
to 9 months. However, we have factored in only a 5% decline in world prices in the year to Q1 2002 - just half that
assumed by the RBNZ in its August Monetary Policy Statement. To the extent that world export prices fall by less than
the RBNZ has assumed, all other things equal, domestic demand is likely to exceed the RBNZ's forecast and inflation
pressures would be somewhat stronger.
Darren Gibbs, Senior Economist, New Zealand
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