Commodity prices continue to fall: ANZ

By NZPA

Wednesday 5th October 2005

The index fell 1.1% in September, following a 0.9% drop in August and a 0.5% fall in July.

ANZ said the falls are a correction from record highs which were hit earlier this year.

"Recent movements appear consistent with a gradual correction in commodity prices from record highs under the influence of a maturing global growth cycle, but supported by favourable supply/demand fundamentals," the bank said in a commentary.

ANZ economist John Bolsover said as well as favourable supply and demand balances for dairy and lamb, ongoing trade restrictions for North American beef were going some way to support commodity prices.

"However the turnaround in the index should serve to emphasis New Zealand's poor trade performance and a current account deficit which will deteriorate further from current levels [of] around 8% of GDP (gross domestic product)," he said.

The bank said prices remained stretched from a cyclical perspective, which meant a more marked correction could occur.

Kiwifruit was the only individual index to record a price increase in September. Dairy, sawn timber and wood pulp were unchanged.

Apples led the way down, falling 19.2% as the export season drew to a close. Other commodities to fall included wool, lamb, beef, venison, skins, logs, seafood and aluminium.

The New Zealand dollar hovered around the US70c in September, underpinned by international investors chasing yield. The continuing strength of the kiwi dollar meant the ANZ New Zealand Dollar Commodity Price Index fell by 1.5% in September.

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