The[B] ANZ Commodity Price Index[/B] gained 6.8% in September, showing prices for New Zealand’s top export goods grew the most in over 22 years in US Dollar terms. In terms of the local currency, however, prices gained just 2.4% as gains in the New Zealand Dollar offset a large portion of exporters’ income from overseas sales. Further, the rebound in the USD-based index over the past seven months has tracked global equity prices (as measured by the MSCI World Stock Index) with near-perfect precision, suggesting it is being driven by swelling risk appetite in capital markets rather than a genuine rebound in demand. This makes recent gains inherently fragile considering traders’ conviction has been noticeably lacking in recent weeks as headline economic data began to falter, a trend capped by September’s disappointing US jobs report. Looking further ahead, the [B]New Zealand Treasury[/B] speculated in a report released today that any near-term improvement in the current account deficit will come on the back of falling imports, not robust overseas sales, saying the shortfall may narrow to little as 5% at some point next year but warning that “a larger more sustained fall is unlikely [as] the higher exchange rate [reduces] the competitiveness of exports.”
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