GDT down again.
Dairy prices slipped again at this week’s Global Dairy Trade auction, its seventh consecutive fall stretching back three over three months.
Overall, the GDT Price Index was down 2.9% compared to the previous auction a fortnight ago. Whole milk powder, by far the biggest traded by volume, was down 3.8%, while skim milk powder was down 5.2%, anhydrous milk fat down 0.3%, butter down 0.8%, and lactose down 8.9%. Cheddar was the sole product to rise, up 1.3%.
The average selling price was $US3,839 and 22,405 tonnes were sold.
Despite the recent losses, the GDT Price Index remains 19.2% higher than at the same time last year and dairy prices are still relatively strong by historic standards.
Rising cost pressures resulted in Statistics NZ’s Consumer Price Index leaping in the June quarter and taking the annual rate of inflation above the Reserve Bank’s 1-3% target range.
The CPI was up 1.3% in the quarter and 3.3% for the year. Both were the highest rates since 2010/11 when the increase in the rate of GST from 12.5% to 15% temporarily boosted the CPI.
On a quarterly basis, the transport group was up 2.2%, with private transport supplies and services up 4.3% – a reflection of higher petrol prices. Housing and household utilities was also up 1.9%, with home ownership costs up 4.6%. Food was up 1.5%, mainly due to higher fruit and vegetable prices (up 7.3%). The clothing and footwear group was also up 3.3% but it is a smaller group so has less weighting on the overall index.
The biggest contributor to the 3.3% annual increase was the transport group, which was up 9.4%, and with private transport supplies and services up 11.3%. Housing and household utilities also increased 3.9%, with home ownership up 7.4%. Household contents and services was also up 3.7%, with household appliances up 6.2%.
Both the quarterly and annual rates of inflation were well above market and Reserve Bank expectations. The hotter data came hard on the heels of the Reserve Bank’s decision last week to reduce its economic stimulus and it will have added to the argument for beginning increasing the OCR as early as its next review August and for steady increases over the next 12-18 months to take it back to 1.75% – which was where it sat two years ago.
Farm sales slip.
The Real Estate Institute of New Zealand’s Rural Property Statistics have shown a recent reduction in farms sold after a strong period from late 2020 to early 2021.
There were 392 farm sales in the three months to June 2021, down 12.9% on the three months to May 2021. Sales were still a lot higher than during the same three month period last year (up 53.7%), but this was partially due to a very low base from the Covid-19 lockdown period.
For the full year to June 2021 51.5% more farms than were sold for the 12 months to June 2020. There were 148.1% more dairy farms sold, while dairy support farms were up 47.6%, grazing farms up 40.1%, and finishing farms up 67.5%. However, arable farm sales were down 30.5%.
The median price per hectare for all farms sold in the three months to June 2021 was $27,181. This was down 3.8% on the three months to May 2021, but up 14.8% compared to the same three month period last year.
Meanwhile, the REINZ All Farm Price Index, which adjusts for differences in farm size, location, and farming type, increased 2.1% in the three months to June 2021 compared to the three months to May 2021. It was also up 10.7% compared to the three months ending June 2020.
Manufacturing and services expanding.
The expansions of both manufacturing and services picked up in June.
The BNZ-BusinessNZ Performance of Manufacturing Index (PMI) was 60.7 in June, up 2.1 points from May. A PMI of more than 50 indicates expansion while a score less than 50 indicates contraction. The PMI’s Production (64.5) and New Orders (63.6) sub-indexes remained firmly in strong expansion mode. Employment (56.5) also picked up, while Finished Stocks (57.3) also showed noticeable improvement. Despite the strength in the PMI negative comments outweighed positive comments, mainly due to labour shortages and logistics issues.
Meanwhile, the Performance of Services Index (PSI) came in at 58.6, up 2.3 points. There were lifts in the key sub-indices of Activity/Sales (62.5) and New Orders/Business (66.1). Comments from respondents were very similar to the PMI, highlighting staff/skills shortages and logistics issues.
Wealth up, savings down.
Statistics NZ’s latest National Accounts (Income, Saving, Assets, and Liabilities) data has shown New Zealanders (in aggregate at least) becoming much wealthier but also less frugal.
Rising asset values resulted in a $118 million (or 5.5%) increase in household net worth in the March 2021 quarter compared with December 2020. This lifted household net worth to $2.3 trillion. Net wealth increased by $402 million (or 21.6%) over the year. The value of household assets was up $417 billion while household debt was up $16 billion.
Although the booming housing market takes most headlines when it comes to net wealth, a strong rise in the value of financial assets was a bigger contributor over the past year. There was a $245 billion increase in the value of financial assets versus a $172 billion increase in the value of owner-occupied property.
Meanwhile, saving by New Zealanders fell to its lowest level in two years after rising sharply in 2020 after Covid-19 restrictions kept spending in check. The savings ratio, which compares saving with net disposable income, was 0.4 in the March 2021 quarter, down from 3.2 in the December 2020 quarter and a historic peak of 14.7 in the June 2020 quarter.
The savings ratio was last as low in March 2019, but in the years up to then it was generally around that level, ranging from a low of -1.1 in June 2017 to a high of 1.5 in June 2016. New Zealanders are just not strong savers.
NIWA Soil Moisture Data. NIWA’s latest soil moisture maps (as at 9am Thursday 22 July) show that, notwithstanding last weekend’s heavy rain and flooding, soil moisture levels are about average for this time of year across almost the whole country. Coastal Central Hawkes Bay remains the one spot that is significantly drier than usual, while coastal Marlborough and parts of Canterbury are significantly wetter than usual.
The NZ Dollar was a little weaker this week, down 0.3% against the Trade Weighted Index. It was up against the Australian Dollar and (to a lesser extent) the UK Pound, but it was down against all other our major trading partner currencies.
Source: Reserve Bank of NZ
Wholesale Interest Rates
Over the course of the week the yield for the 90 Day Bank Bill was up a further 5 points to 0.46% but the 10 year Government Bond yield was down 4 points to 1.60%.
The Reserve Bank will next review monetary policy settings (including the OCR) on Wednesday 18 August.
|This Week (22/7/21)||Last Week (15/7/21)||Last Month (22/6/21)||Last Year (22/7/20)|
|90 Day Bank Bill||0.46%||0.41%||0.34%||0.31%|
|10 Year Government Bond||1.60%||1.64%||1.80%||0.83%|
Source: Reserve Bank of NZ