By BRIAN FALLOW, economics editor
Prices for New Zealand's export commodities continued to improve last month, not only in world price terms but when converted into New Zealander dollars as well.
ANZ's commodity price index posted its fourth consecutive monthly gain in world price terms, continuing the recovering trend under way since the middle of last year.
But the stronger New Zealand dollar whittled back the 3.3 per cent increase in the world price index to a 1.4 per cent increase in New Zealand dollar terms.
In local currency terms, overall commodity prices have risen 3.7 per cent over the past three months.
But ANZ chief economist David Drage said it would be brave to conclude that exporters had seen the worst of the cycle. Another period of significant US dollar weakness could see the improvement in New Zealand dollar returns falter, he said.
Over the past year commodity prices have risen 10 per cent in world price terms but fallen 10 per cent in New Zealand dollar terms.
"However we expect further gains in the New Zealand dollar on a trade-weighted basis to be more modest over the remainder of the year," Drage said.
Even if the worst was over for commodity prices, working through the lags in contractual arrangements and foreign exchange hedging rolling off would mean the chilling effects of the currency appreciation of the past year would continue to be felt.
Dairy prices, which make up about a third of the index, rose 5.5 per cent last month. They are now 47 per cent above their lows in the middle of last year.
Wool was the only commodity to record a decrease (2.6 per cent) last month, but lamb prices are at their highest level during the 18-year history of the index, apart from the two months of December 1996 and January 1997, ANZ said.
Aluminium rose 4.1 per cent last month to be 14.1 per cent above its low in August last year.
But despite an improved world economic outlook demand is not expected to grow enough to absorb production increases, calling into question whether it would hold on to those gains, the bank said.
NZ commodity prices healthy
AdvertisementAdvertise with NZME.