Data Flash (New Zealand)
The foreign currency price of New Zealand's commodity exports fell 4.0% mom in November, the largest one month fall
recorded since October 1990, to be 8.5% weaker than the peak recorded in May. The main drivers of this month's result
were a 14.3% mom decline in skin prices and a 10.3% mom decline in dairy prices (the latter influenced by the EU's
decision to increase export subsidies).
Significant falls were also recorded for beef, wool, venison, sawn timber and seafood. Of the 17 commodities surveyed,
11 recorded price decreases, 3 were unchanged and just 3 (aluminium, casein and lamb) recorded price increases.
Reflecting the appreciation of the NZD, the NZD price index fell 4.8% mom in November. The index is now 4.2% lower than
a year earlier but still 44% higher than its cyclical low point in mid 1999.
Comment
As the chart below illustrates, this month's decline in commodity prices is consistent with the sharp decline in overall
export prices that is projected in our recently released Economic Forecasts. It is also consistent with the sharp
declines projected by the RBNZ in its 14 November Monetary Policy Statement. As a result, there is no `news' for
monetary policy in today's release. However, over coming months, it will be important to continue to monitor commodity
prices for signs that the downturn could be deeper than so far assumed, thus providing cause for a further easing of
monetary policy settings. At present, we attach a 30% probability to further easing, with our central view being that
the next move in the OCR will be a 25bps tightening at the August 2002 Monetary Policy Statement.
Ends