By BRIAN FALLOW
Commodity prices slipped back in November as the New Zealand dollar strengthened and world prices continued to go sideways.
"We have probably seen the peak," said ANZ Bank chief economist Bernard Hodgetts.
World prices for New Zealand's export commodities climbed through 1999 and the first quarter of this year but have been going nowhere since then. A 0.3 per cent dip last month left them only 0.1 per cent higher than in March.
Mr Hodgetts said that, with the world economy slowing, overall commodity prices would struggle to make significant gains next year, though some, like beef, might.
A drop in wool prices was the main influence last month - the Chinese are buying less - and returns for processed timber and aluminium were also lower. "The Australian building industry has slumped following the introduction of GST and the staging of the Olympics. This has put downward pressure on timber prices and has started to impact on the carpet market with similar consequences for wool."
Combined with the turnaround in the fortunes of the New Zealand dollar, the effect was a 0.5 per cent reduction in ANZ's commodity price index in local currency terms. But that still leaves it 30 per cent higher than a year ago and nearly 50 per cent up on April 1999.
"One would have to be reasonably optimistic that a fair chunk of those gains will be retained, but it depends on the dollar," Mr Hodgetts said.
ANZ is among those forecasting a continued recovery in the currency, to around 50USc by the end of next year.
Signs that commodity prices have peaked coincide with indications that export volumes are in the doldrums.
The "export-led" recovery has been very much a price phenomenon, Mr Hodgetts said. Volume growth in exports has been tapering off over the past three quarters; in fact volumes shrank during the September quarter according to this week's terms of trade data.
"That may be just statistical noise which gets reversed next quarter. But if things don't get going again shortly, it will draw the line through the idea that exports are driving the recovery," Mr Hodgetts said.
Export boom 'may have peaked'
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