by Nick Clark, Federated Farmers Manager General Policy
Food prices drop
Food prices fell in October, the first monthly drop since February, according to Statistics NZ’s monthly Food Price Index.
On a monthly basis, comparing October 2021 with September 2021, food prices fell 0.9% (and by 0.1% when seasonally adjusted), with:
- Fruit and vegetable prices fell 5.9% (down 0.2% seasonally adjusted), with fruit up 1.2% but vegetables down 9.6%.
- Meat, poultry, and fish prices fell 0.4%, with beef & veal down 0.4% and mutton, lamb & hogget down 1.2%.
- Grocery food prices were flat (up 0.2% seasonally adjusted), with bread & cereals up 0.6% and milk, cheese & eggs down 0.7%.
The monthly drop in food prices resulted in the annual increase easing a little from 4.0% for the year to September 2021 to 3.7% for the year to October 2021, with:
- Fruit and vegetable prices rose 9.0%, with fruit up 1.5% and vegetables up 14.0%.
- Meat, poultry, and fish prices rose 2.3%, with beef & veal down 0.2% and mutton, lamb & hogget up 9.6%.
- Grocery food prices were rose 3.1%, with bread & cereals up 2.3% and milk, cheese & eggs up 6.3%.
Bumps in the road
Traffic volumes were ‘messy’ in October, according to ANZ’s monthly Truckometer, with Covid restrictions tightening in Waikato, coming and going in Northland, and Auckland’s border still closed.
The light traffic index was particularly affected by the restrictions and it fell 6.4% month-on-month. It was also 24.2% lower on an annual basis (using three month averages). The heavy traffic index fared better, rising 1.0% month-on-month but annually it was still down 7.4%.
ANZ warned that ‘differing regional lockdown restrictions mean that the Truckometer indexes are unlikely to be a reliable GDP indicator in the near term’. Once restrictions ease traffic flows and economic activity should bounce back but probably not as strongly as they did after last year’s national lockdown.
Businesses increasingly wary
Business confidence has slid further in preliminary results for ANZ’s Business Outlook Survey for November. All forward-looking indicators fell except employment where there was an increase in hiring expectations.
Overall, a net 18.1% of respondents expect general economic conditions to worsen over the next 12 months, a 4.7 points deterioration on October’s final result. Meanwhile, a net 15.6% of respondents expect their own activity to increase, down 6.1 points.
Cost expectations remain stratospheric and if anything got worse, rising 1.8 points to a net 89.0% expecting their costs to increase. Pricing intentions were down only slightly (0.9 points) to a still high 64.6% expecting to increase their selling prices, while forward-looking inflation expectations jumped from 3.45% to 4.33%. Profit expectations slipped 2.7 points to a net 8.9% expecting their own profitability to fall.
ANZ observed that the survey ‘highlights understandable wariness as we move into a COVID-endemic world. The one certainty is that costs are through the roof’.
The final survey results for November are due at the end of the month.
Job ads recover
Job advertisements edged up in October, according to the BNZ-SEEK Employment Report.
Compared to September, job ads were up 0.7%. Although ads remain below their peak in July, they remained 36.8% higher than in October 2020.
Locked down Auckland, Waikato, and Northland were among five regions where ads were down on a monthly basis. The strongest growing regions were in the provinces – Hawkes Bay, Southland, Marlborough, Gisborne, and Bay of Plenty with grow rates between 7% and 11%.
17 out of 28 industries had monthly increases in ads. One of those was the farming, animals, and conservation industry, which had a 3% increase.
Retail’s partial recovery
Retail sales jumped in October compared to September but they remain well below the same month last year and the last full month before the current Covid restrictions.
Statistics NZ’s monthly Electronic Card Transactions show that seasonally-adjusted sales were up 9.5% in October 2021 compared to September 2021 to $7.41 billion. Consumables (i.e., groceries) slipped 0.2% but other retail industries posted strong gains, especially vehicles up 26.9%, apparel up 18.6%, fuel up 16.3%, and durables (i.e., furniture, electronics, etc.) up 11.5%. All these sectors had been hammered in August when restrictions were imposed. Seasonally-adjusted sales also remain $1.13 billion (or 13.2%) lower than in July.
Compared to the same month last year, the actual value of electronic card transactions was down 9.2% to $7.52 billion. Consumables increased 6.6% but other retail industries remained lower, with particularly big differences for apparel down 35.3%, services down 24.9%, hospitality down 24.1%, and durables down 11.3%.
Spring lift for the housing market
The residential property market rebounded in October, according to the latest monthly data from the Real Estate Institute of NZ.
Although the 7,190 house sales in October 2021 was 21.7% below those in October 2020, sales were up 30.3% on September 2021’s 5,518 sales. Low supply of houses on the market is the main reason for lower sales, not a lack of demand.
Median sales prices were also up in October, to $895,000. This was not only a big month-on-month jump but it was also a 23.4% increase on October 2020’s median of $725,000.
The median house price in Auckland increased to $1.25 million, up 25% for the year. All regions had double digit annual percentage increases, with the biggest increases for Hawkes Bay (up 37.7%), Taranaki (up 31.1%), and Canterbury (up 31.0%), with the smallest increases in West Coast (up 10.0%), Otago (up 11.8%), and Gisborne (up 12.3%).
The median days to sell was 34, up 5 days compared to October 2020.
Notwithstanding this month’s bump, economists still expect the housing market to cool. Demand should be impacted by higher mortgage interest rates, affordability constraints, tighter LVR restrictions, and tax policy changes, while strong building consents should see housing supply lifting relative to what has been much slower population growth.
NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 11 November) show, relative to last week, soil conditions drying out over much of the South Island and southern North Island. In contrast soils in eastern Northland, the top of the Coromandel Peninsula, and from East Cape to Hawkes Bay are significantly wetter than usual after recent heavy rain.
The NZ Dollar lost some ground this week, down 0.9% against the Trade Weighted Index. It was up against the Australian Dollar and the UK Pound, but down against the other 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 four points to 0.84%, while the 10 year Government Bond yield was up a further eight points to 2.64%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 24 November. Another increase is likely.
|This Week (11/11/21)||Last Week (4/11/21)||Last Month (11/10/21)||Last Year (11/11/20)|
|90 Day Bank Bill||0.84%||0.80%||0.66%||0.28%|
|10 Year Government Bond||2.64%||2.56%||2.07%||0.76%|
Source: Reserve Bank of NZ