Dip in export commodities prices hints at change of tide

Prices for New Zealand's export commodities have fallen for the first time in 18 months, the ANZ world commodity price index for December shows.

This could be the first sign that the golden run for exporters of commodities - which has underpinned the nation's strong economic growth - was at an end, ANZ chief economist John McDermott said.

A turning point had been expected. Sawn timber led the falls, dropping 12.1 per cent for the month, and beef recorded the second largest decline, with a 5.1 per cent drop.

Others to dip were kiwifruit, wool and logs - all dropping 2 per cent to 3 per cent.

Partially offsetting the decline were rises for lamb, venison, dairy, fish and apples.

McDermott said dairy and lamb prices appeared to be supported by structural factors, as opposed to the cyclical trends driving commodities such as beef and logs.

Dairy prices have been underpinned by steadily increasing demand in China and Southeast Asia while lamb was able to maintain premium prices because of its good reputation in international markets.

Lamb and aluminium recorded the largest price increase - both rose 2.3 per cent.

Compared with the same month a year ago, commodity prices were 16.3 per cent higher but that represents the lowest annual rate of increase for nine consecutive months.

While cautious of predicting trends from a one-month move, McDermott said the raw data collected over the past three months made him think a turning point had been reached.

The prices in original currency returns - prior to being converted to US dollar terms for the index - showed New Zealand commodities had already been flat for three months.

"Commodity prices have had a good run over the past 18 months and that's been supportive of real growth in the economy and real income growth," McDermott said.

"With the dollar as high as it has been, it would have been devastating without those higher commodity prices."

The New Zealand Dollar Commodity Price Index - a measure of prices after they have been translated back into New Zealand dollars - fell 4.7 per cent in December.

The fall was exacerbated by a pre-Christmas rise which saw the kiwi soar to post-float highs of almost US72c.

The kiwi has since eased back.