Commodity prices slip.
The ANZ Commodity Price Index was down again in August but it’s still well ahead of the same time last year and remains near its record high set in June.
The World Price Index was down 1.6% in August compared to July, following a 1.7% decline over the previous month. The Index was dragged down by a 4.0% fall for dairy prices and a 6.6% fall for forestry prices. However, prices were stronger for meat and fibre (up 2.8% with gains across the board for beef, lamb, and wool); horticulture (up 1.3%); and aluminium (up 3.6%).
With the NZ Dollar broadly unchanged for the month (down just 0.1%), the NZ Dollar Index was also down 1.6%.
On an annual basis, comparing August 2021 with August 2020, the World Price Index was up 21.5% and the NZ Dollar Index was up 15.4%.
ANZ observed that global shipping costs are still rising and supply chain problems continue.
GDT increases.
This week’s Global Dairy Trade auction posted a healthy increase in dairy prices with the GDT Price Index up 4.0% compared to the previous auction three weeks before on 17 August.
All commodities on offer enjoyed solid price increases. In order of volumes, whole milk powder was up 3.3%, skim milk powder up 7.3%, anhydrous milk fat up 3.1%, butter up 3.7%, cheddar up 3.6%, butter milk powder up 3.0%, and lactose up 6.4%.
The average selling price was $US3,927 and 25,093 tonnes were sold.
After a long run of declines from March to August, this was the second consecutive increase in the GDT Price Index. The Index is now 33.3% higher than at the same time last year.
Traffic volumes dive.
Traffic flows plummeted in the latter half of August as the country was plunged into lockdown restrictions.
ANZ’s monthly Truckometer for August showed light traffic volumes down 27.6% compared to July, while heavy traffic volumes were down 18.1%. The last 14 of 31 days in the month were in Level 4.
Restrictions across most of the country (i.e., outside Auckland) were relaxed in September. Traffic volumes will recover and they could bounce back quickly, especially if people get out and spend up as they did last year. But if ‘Delta’ restrictions are maintained (especially in Auckland) it could take time to regain momentum.
Lockdown hits job ads.
The reimposition of lockdown restrictions also hit job ads in August, according to the monthly BNZ SEEK Employment Report.
August’s job advertisements were down 12% compared to July’s. Not surprisingly, hospitality and tourism was the hardest hit industry (down 29%) but ads for the farming, animals, and conservation industry were also down 14%.
In the months leading up to August job ads were riding exceptionally high, well above pre-COVID peaks. Whether August’s drop (which will probably extend into September) is just a blip or presages a more substantial correction will depend on how long restrictions are maintained and how quickly the economy recovers.
House building drives construction growth.
The volume of building activity rose 2.0% in the June 2021 quarter compared to the March quarter, according to Statistics NZ’s quarterly Value of Building Work put in Place.
Residential building activity drove the increase, rising 4.2%, while non-residential building activity fell 1.5%.
The actual value of total building work was $7.21 billion in the June quarter – $4.93 billion for residential work and $2.29 billion for non-residential work. $89 million of the latter was for farm buildings.
For the year to June 2021 total building work was worth $27.26 billion, up 14.6% on the year to June 2020. Residential work was up 20.9% to $18.32 billion while non-residential work was up 3.6% to $8.94 billion. Farm building work was up 4.2% to $316 million.
Jobs up in June quarter.
Statistics NZ’s latest Business Employment Data showed there were 2.13 million filled jobs in the June 2021 quarter. This was up 1.0% on the March quarter (and up 0.7% when seasonally adjusted).
The were 92,929 filled jobs in agriculture, forestry, and fishing. This was down 8.0% on the March quarter but such a drop is typical in the autumn and winter months. In fact, when seasonally adjusted jobs in that industry were up 0.9%.
Compared to the same quarter last year total filled jobs were up 0.9% but those for agriculture, forestry, and fishing were down 0.3%.
Total employee earnings were $34.92 billion in the June 2021 quarter, up 10.0% compared to the same quarter last year. Earnings for agriculture, forestry, and fishing employees were $1.23 billion, up 6.1%.
Soft manufacturing sales volumes.
Statistics NZ’s quarterly Business Financial Data showed manufacturing sales volumes in the June 2021 quarter dipping slightly from the March quarter. This comes after three consecutive quarter-on-quarter rises.
When adjusted for seasonal effects, manufacturing sales volumes were down 0.1% from the March quarter. Volumes are calculated by removing the effect of price changes from sales values. The volume of meat and dairy product manufacturing was up 0.1%.
Although manufacturing sales volumes declined, sales values were up 3.9% due to higher prices. Dairy and meat product manufacturing had the largest value increase, up $596 million (or 6.6%) in the June quarter, again boosted by higher prices.
Another notable point from the data was a 32% leap in sales for the electricity, gas, water, and waste services industry, due to the recent surge in electricity generation prices.
Rates revenue up 4.4%.
Council rates revenue for the year to June 2021 was $6.74 billion, up 4.4% for the year, according to Statistics NZ’s quarterly Local Authority Statistics.
The sector’s total operating income for the year to June was $11.58 billion, up 5.3%. Rates as a percentage of total operating income was 58.2%, down slightly on the previous year. The biggest increase in income was that from grants, subsidies, and donations, up 22.3%.
Local authority operating expenditure for the year to June 2021 was $12.46 billion, up 4.2%. The sector’s operating deficit narrowed slightly from $964 million to $884 million.
Based on our experiences with this year’s council long-term plan consultations rates increases will accelerate in 2021/22.
Next week
Next week’s big economic news will be June quarter GDP. It’s likely to post solid quarter-on-quarter growth of at least 1%. Growth should be broad-based across industries, including the primary industries, although some sectors (e.g., accommodation and hospitality) will continue to be down on their pre-Covid activity.
The June quarter is already ancient history with the current September quarter drawing to a close. And it feels even more ancient given the economic impacts of the recent (and in Auckland’s case ongoing) lockdown which will be giving September quarter’s GDP a knock.
The June quarter’s balance of payments will also be out next week. The current account deficit will widen on the back of weaker exports and stronger imports.
NIWA Soil Moisture Data.
NIWA’s latest soil moisture maps (as at 9am Thursday 9 September) show a similar picture to recent weeks with the moisture of most of the country’s soils being about normal for this time of year. The exceptions continue to be in the Hawkes Bay, where soils are drier than usual while Marlborough and parts of Canterbury and Otago are wetter than usual.
Exchange Rates
The NZ Dollar was up again this week, rising 0.5%. It was up against all our key trading partners.
Source: Reserve Bank of NZ
Wholesale Interest Rates
This week the yield for the 90 Day Bank Bill was up a further 4 points to 0.53%. Meanwhile the 10 year Government Bond yield was up a further 11 points to 1.92%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 6 October.
| This Week (9/9/21) | Last Week (2/9/21) | Last Month (9/8/21) | Last Year (9/9/20) | |
| OCR | 0.25% | 0.25% | 0.25% | 0.25% |
| 90 Day Bank Bill | 0.53% | 0.49% | 0.65% | 0.30% |
| 10 Year Government Bond | 1.92% | 1.81% | 1.66% | 0.57% |
Source: Reserve Bank of NZ