Export prices slump in November

By Phil Boeyen, ShareChat Business News Editor

Tuesday 4th December 2001

There's further evidence that New Zealand export returns are in a downward trend with the ANZ Bank revealing its World Commodity Price Index fell sharply in November.

The bank says the index dropped 4% during the month compared with October, the largest monthly fall for 11 years. The index is down 8.5% on its peak in May and has returned to the same levels as a year ago.

ANZ says the main downward pressure is from significantly lower world prices for milk powders and butter but there was further weakness in other commodity prices as well.

"While weakening demand has continued to undermine world dairy prices, this has been compounded over the past month by regulatory changes undertaken by the European Union and the United States," the bank says.

"Last month, ANZ economists commented on concerns that the European Union could be prompted to intervene in dairy markets in response to lacklustre demand, and on stocks of skimmed milkpowder that have accumulated in the United States.

"Their concerns that the weaker commodity outlook could be exacerbated by policy-makers in the European Union and the United States were borne-out in November."

For the third consecutive month prices for animal skins recorded the largest fall, down 14.3% in November, while dairy prices dropped 10.3%.

Prices for wool, venison, sawn timber, seafood and kiwifruit also fell. The only price increases during the month were for aluminium, casein and lamb.

ANZ chief economist David Drage says the decrease in international commodity prices was amplified by a slightly stronger New Zealand dollar last month.

Mr Drage points out that the Reserve Bank projected considerable export price weakness when it cut interest rates by 50 points last month and the latest statistics are unlikely to alter its views over interest rates.

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