Economic Week - March 15


by Nick Clark

 
Food prices up
Food prices increased in February, according to Statistics NZ’s monthly Food Price Index.  Compared to January, they were up 0.4% in nominal terms and up 0.7% when seasonally adjusted.

  • Fruit and vegetable prices rose 2.3%, with fruit up 1.9% and vegetables up 2.7%.
  • Meat, poultry and fish prices fell 0.6%, but there were increases for beef and veal (up 1.5%) and mutton, lamb and hogget (up 3.6%).Lower poultry prices offset these rises.
  • Grocery food prices also fell 0.8%, with bread and cereals up 0.1% and milk, cheese and eggs down 1.5%.

On an annual basis, comparing February 2019 with February 2018, food prices were up 1.7%. 

  • Fruit and vegetable prices were down 0.6%, with fruit down 2.4% and vegetables up 1.1%.
  • Meat, poultry and fish prices were up 3.5%, with beef and veal up 8.3% and mutton, lamb and hogget up 10.6%.
  • Grocery food items were up 0.8%, with bread and cereals up 1.1% and milk, cheese and eggs up 1.4%.

Meat and dairy drive manufacturing up
The volume of manufacturing sales rose a seasonally adjusted 2.0% in the December quarter, according to Statistics NZ’s quarterly Economic Survey of Manufacturing.  The increase was led by a 4.0% rise in meat and dairy product manufacturing, bouncing back from a 5.9% fall in the September quarter.
Although the volume of manufacturing sales was up in the December quarter, the value of manufacturing sales was down a seasonally adjusted 0.5%. 
Compared to the December 2017 quarter, total manufacturing sales volumes were up a seasonally adjusted 0.2% (with values up 3.7%), with meat and dairy product manufacturing volumes were up 1.0% (with values up 0.6%).

House sales dry up
The number of residential properties sold in February was down sharply on the same time last year.  The Real Estate Institute of NZ’s monthly Residential Market Report, showed that in February 2019 there were 5,954 house sales, down 9.5% on February 2018’s 6,576.  Auckland’s drop was particularly steep – down 17.9%.
Although sales volumes were down, the nationwide median sale price was up 3.2% for the year to reach $560,000.  The Auckland median sale price was down 2.0% to $850,000, while the remainder of the country was up 8.1% to $490,000. The biggest upward movers were Gisborne (up 25.8%), Manawatu-Wanganui (up 23.4%) and Southland (up 20.8%).
The median days to sell was up from 44 in February 2018 to 47 in February 2019.
REINZ attributed the lower level of sales volumes compared to the same time last year to a raft of legislative changes impacting the housing market, increasing difficulty accessing finance (despite record low OCR and very low mortgage rates from the banks) and vendors’ pricing expectations.  It said there is a ‘wait and see’ approach being taken by buyers and sellers alike.

Next week
Next week sees the releases of December 2018’s quarterly Gross Domestic Product and Balance of Payments statistics.  GDP growth is likely to have continued to slow down, as it has done so gradually over the past couple of years, to an annual rate of around 2.5%.  Meanwhile the annual current account deficit is likely to have continued to increase to close to 4% of GDP.

NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 14 March) show the effect of rain over the past week which has resulted in some areas previously much drier than usual (e.g., Nelson and Golden Bay) becoming less so.  Nevertheless, it is still significantly drier than usual in the North Island from Northland through to Bay of Plenty as well as in Buller and Southland.

Exchange Rates

Over the week, the NZ Dollar was up against the TWI and it was also up against the currencies of all our major trading partners.

 

NZ Dollar versus

This Week

(14/3/19)

Last Week (7/3/19)

Last Month (14/2/19)

Last Year (14/3/18)

US Dollar

0.6850

0.6779

0.6811

0.7334

Australian Dollar

0.9681

0.9638

0.9600

0.9325

Euro

0.6047

0.5993

0.6046

0.5917

UK Pound

0.5157

0.5143

0.5299

0.5247

Japanese Yen

76.19

75.67

75.56

78.24

Chinese Renminbi

4.5958

4.5491

4.6036

4.6414

Trade Weighted Index

74.41

73.81

74.17

75.30

Source: Reserve Bank of NZ

 

Wholesale Interest Rates

Over the week, the 90 Day Bank Bill rate was down 3 basis points, while the 10 Year Government Bond rate lost a further 6 basis points and hit a record low earlier in the week of 2.05%. The OCR has been unchanged on 1.75% since November 2016.

 

 

This Week

(14/3/19)

Last Week (7/3/19)

Last Month (14/2/19)

Last Year (14/3/18)

OCR

1.75%

1.75%

1.75%

1.75%

90 Day Bank Bill

1.87%

1.90%

1.91%

1.89%

10 Year Government Bond

2.06%

2.12%

2.21%

2.93%

Source: Reserve Bank of NZ