Wool leads surge in commodity prices

New Zealand commodity prices climbed to a new high in October as wool prices surged for a second month amid increased Chinese demand for coarse fibre, according the ANZ Commodity Price Index.

The index rose 3.5 per cent to 283.4 as the world price for wool jumped 29 per cent to a 21-year-high as Chinese buyers restock supply amid forecast demand for carpets next year.

The value of New Zealand wool exports rose 17 per cent to $43 million in September, from the same month a year earlier, according to government data.

In New Zealand dollar terms, the bank's index gained 0.8 per cent to 206.2.

"Over the past two months, wool prices have rebounded, largely on the back of a return of Chinese buyers, with some restocking of supply chains occurring in anticipation of a pick-up in worldwide demand for carpets in mid-2011," said the bank's chief economist Cameron Bagrie in his report.

"Recent signs suggest that Chinese manufacturing activity (which is a large driver in demand of NZ wool) is faring much better than many would have thought, even a few months ago."

Rising commodity prices have helped underpin New Zealand's economic recovery, with a rebound in dairy prices leading the charge over the past 15 months.

Central bank Governor Alan Bollard expects consumer spending to improve once producers finish repaying debt, and can enjoy the bigger returns they're achieving.

Bagrie said "booming commodity prices are a critical support pillar" for the economy going into next year as they help the rural sector deleverage, and provide "a huge income and revenue boost to the economy."

Other local raw materials to appreciate in value last month were a 10 per cent rise in skins, an 8 per cent increase in the price of aluminium, and rises of between 3 per cent and 4 per cent for dairy, lamb and log prices.

Seafood prices were up 2 per cent in October.

Beef reported the biggest fall, down 3 per cent in the month, while sawn timber slipped 2 per cent and apples recorded a small drop.