Data Flash (New Zealand)
The foreign currency price of New Zealand's commodity exports fell 2.4% mom in October, more than reversing the gains of
the past two months, to be 4.7% weaker than the peak recorded in May. The main driver of this month's result was a 23%
decline in skin prices. However, of the 17 commodities surveyed, 10 recorded price decreases, 5 were unchanged and just
two (lamb and fish) recorded increases.
Reflecting the depreciation of the NZD, the NZD price index fell by a lesser by a 0.6% mom in October. The index is 0.9%
higher than a year earlier but over 50% higher than its cyclical low point in mid 1999.
Comment
Finally, the continued deterioration in the global economy appears to begun to weigh substantially on the world price of
many of New Zealand's export commodities. In our view, despite the presence of a favourable supply side influences
impacting on a number of commodities, world prices are likely to continue to trend downwards over the next 6 to 9
months. This data provides additional evidence that the global slowdown is set to impact on New Zealand in a more
significant way than has so far been the case. Therefore, it reinforces the likelihood of the RBNZ easing by 50bps on 14
November, as now expected by the majority of analysts and as is largely priced into the market.
Ends