KEY POINTS:
The global economic slowdown is biting into international commodity prices but a fall in the kiwi dollar is helping insulate New Zealand exporters.
The ANZ Commodity Price Index, which uses the most relevant national currency for each commodity, recorded its biggest monthly drop in seven years, falling 3.3 per cent in August.
ANZ chief economist Cameron Bagrie said the drop reflected the global environment.
"We just seem to have hit some sort of critical mass or inflection point where the global picture is now sufficiently weak that people start to question the robustness of the commodity price story and we're starting to see an adjustment down," Bagrie said.
An easing in the value of the kiwi relative to the country's major trading partners saw the New Zealand dollar price index rise 2 per cent in August.
The largest currency value fall was 6.1 per cent against the US dollar, while the kiwi appreciated against the Australian dollar from a seven-year low in July.
"It's a new world because the global economic position is obviously deteriorating but we are seeing adjustments through other areas such as the currency which is actually going to mitigate the impact on the New Zealand export sector," Bagrie said.
"So the New Zealand dollar is actually providing a bit of a buffer to what's going on at the moment and that's actually the sign of a very healthy macro-economic framework." The New Zealand dollar price index for dairy products fell 1.5 per cent in August, while the world price index for that sector dropped 7.5 per cent.
The world price index for dairy products had risen for 15 consecutive months from 127.6 in August, 2006 to hit 291.9 in November but has since fallen to reach 238.6 in August.
The rise was driven by factors including reduced supply, drought in Australia, world economic growth and demand from emerging markets.
The dairy price could lose half the increase it gained during the previous two years, Bagrie said.
Lamb, log and seafood prices rose while wool, beef and kiwifruit fell.
