Economic Week - July 5

by Nick Clark

Export growth flattens

At this week’s Primary Industries Summit, the Ministry for Primary Industries presented its latest Situation and Outlook for Primary Industries.
The good news was that for the year to June 2019 primary sector exports are forecast to be $45.7 billion, up $3.0 billion or 7.1% on the year to June 2018, which was in turn up $4.5 billion or 11.7% on the year to June 2017.
Dairy exports are forecast to have grown by or 5.7% to reach $17.6 billion for the year to June 2019 while meat and wool exports are forecast to have grown by 6.4% to reach $10.2 billion. Forestry (up 7.8% to $6.9 billion) and horticulture (up 13.7% to $6.1 billion) are also forecast to have grown strongly.
Although it is a bit much to expect stellar rates of growth to continue indefinitely, the less good news is that primary industries’ exports are forecast to no better than flat-line over the coming year to June 2020. 
While dairy exports are forecast to increase a further $210 million to $17.8 billion, meat and wool exports are forecast to drop $250 million to $9.9 billion.  Forestry and horticulture are also forecast to have static growth.  Softening prices, from in some cases (e.g., lamb) exceptionally high levels, and a slowing in volume growth are cited as the reasons for the stall.
SOPI shows very clearly the continued critical importance of the primary industries to the New Zealand economy.

Commodity prices drop
The ANZ World Commodity Price Index fell 3.9% in the month of June, to record its first decrease for 2019.  It is now 2.4% lower than in June 2018.
The good news was the meat and fibre index lifting 1.7% in June, with stronger prices recorded for both beef and lamb.  However, consistent with recent falls in the Global Dairy Trade, the dairy index fell 8.5% in June, with all of the major dairy ingredients weaker.  The horticulture (down 1.0%) and forestry (down 3.5%) indexes also slipped.
The fall in the World Price Index was exacerbated by the stronger NZ Dollar resulting in the NZD Index falling a steeper 4.5% in June.  However, it is still up 1.9% compared to June 2018.

GDT edges down
This week’s Global Dairy Trade auction slipped 0.4%, the fourth consecutive decline albeit a small one. 
Whole milk powder was unchanged and skim milk powder posted a 3.2% gain but the other commodities fell in price.
Overall, the average selling price was US$3,302 and 24,711 tonnes of product was sold.
Despite its recent declines, the GDT Price Index is 0.7% higher than the same time last year.

Business confidence down again
Another week and another grim business confidence survey.  This week it was the turn of the long-standing and well-regarded NZIER Quarterly Survey of Business Opinion
The June quarter survey’s headline measure of business confidence fell to its lowest level since March 2009, with a net 31% expecting a deterioration in general economic conditions over the coming months, a 3 point worsening on the March quarter.
Adding to the negative news was a further decline in firms’ own trading activity, with a net 4% reporting reduced demand in the June quarter. A net 4% also expect demand to fall in the next quarter – the weakest level since June 2009. According to NZIER, these measures suggest a softening in annual GDP growth to below 2% over the second half of 2019.  In addition, overall profitability fell to its lowest level since March 2011.
Confidence amongst manufacturers fell to its lowest level since December 2008 to be the most pessimistic sector.  That said the survey does not directly measure the agricultural sector.  We have invited farmers to complete Federated Farmers’ six-monthly Farm Confidence Survey and this will give a further take on how the agricultural sector is feeling.

Ag debt climbs
Agricultural debt rose $526 million in the month of May to reach $63.5 billion, according to the Reserve Bank’s monthly Sector Credit Statistics.  Historically, May and June are the months with the largest increases in agricultural debt.
On an annual basis agricultural debt was up $2.4 billion (4.0%) compared to May 2018.  The annual rate of growth in housing debt (up 6.3%) and business debt (up 4.7%) exceeded that of agricultural debt but personal consumer debt (up 1.7%) lagged behind.

House consents jump
Statistics NZ’s monthly Building Consents Issued statistics show the number of new homes consented in May 2019 rose a seasonally adjusted 13.2% to 3,686 following falls in March and April.  The rise was mainly due a big leap in townhouses, flats and units.  This was the highest monthly figure since May 1974.
For the year ended May 2019, the actual number of new homes consented was 34,672, up 6.3% from the May 2018 year.
The same stats showed that in May 2019 $28 million worth of farm buildings were consented, up 12.1% on May 2018.  For the year ended May 2019, farm buildings consents were worth $321 million, down 9.0% on the year to May 2018.

NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 4 July) continue to show most of the country having about average soil moisture levels. There are however some hot spots of dryer than average conditions in the Far North, inland Rangitikei, coastal Wairarapa, inland Marlborough, and Waimate/Waitaki.

Exchange Rates

Over the course of the week the NZ Dollar was up against the Trade Weighted Index and it was up against all our major trading partners, except the Australian Dollar.



NZ Dollar versus

This Week


Last Week (27/6/19)

Last Month (4/6/19)

Last Year (4/7/18)

US Dollar





Australian Dollar










UK Pound





Japanese Yen





Chinese Renminbi





Trade Weighted Index





Source: Reserve Bank of NZ


Wholesale Interest Rates

Over the course of the week the 90 Day Bank Bill rate was unchanged while the 10 Year Government Bond Rate was down 4 basis points. 



This Week


Last Week (27/6/19)

Last Month (4/6/19)

Last Year (4/7/18)






90 Day Bank Bill





10 Year Government Bond





Source: Reserve Bank of NZ