New Zealand Dairy And PPI

19 February, 2019

Coming up during the Asians session, we have a couple of pieces of New Zealand macro data that could generate some waves in the currency markets: the bi-monthly dairy price index and PPI data.

The latter gets more attention given the kiwi habit of not publishing monthly inflation data. Here are some things to consider ahead of the potential moves in the markets.

GDT Price Index


The Global Dairy Trade Price Index has lost some of its prior relevance to the NZD as the economy has diversified over the last few years. However, it is still important.

Over a fifth of New Zealand exports in dollar terms are dairy products. There is no fixed time of release, which makes anticipating the associated market moves a little harder.

Over the last couple of months, dairy prices have been far surpassing expectations. The last publication at the start of the month was forecast to have increased by 0.1% but jumped 6.7%.

Several Factors Involved 


Over 25% of New Zealand’s exports go to China, which has continued to increase demand despite slowing economic growth. However, in the immediate term, diplomatic issues related to the dispute over Huaweihave led to the postponement of dairy and tourism initiatives between the countries.

The other factor is long-term price trends due to supply issues. Earlier today Danone, one of the world’s largest dairy consumers, stated in their quarterly report that they are expecting increased supply costs, going forward. This is due to ongoing supply issues, as it takes at least two years to bring new production online.

Even without the longer-term supply issue, the polar vortex in North America in the last 2 weeks has led to a significant drop in production. This is because the affected area is one of the world’s largest dairy producing regions. This, of course, will have an impact on the price. But, now that weather has normalized, it should help bring the price closer to the longer term trend.

GDT Price index is expected to rise by 2.2%, which is still considerably above the annual average.

PPI, Output, and Input.


PPI in New Zealand takes the place of monthly CPI. It is the leading measure of consumer price inflation. This is because the increasing output of producer prices is indicative of how much consumers are buying those products.

We should factor the currency effect into this data since the cost of imports tends to determine a lot of the producer prices. As a relatively small economy, New Zealand imports most of its industrial consumer goods. Some of this effect is tempered by the tandem movement of the NZD and AUD, which is the country’s largest trading partner.

Over the last three months, both input and output prices have increased. However, they remain below 2.0%, which is the target inflation rate for the RBNZ. Output prices have been rising faster than input prices. Of the last eight months, NZ has run a trade deficit during seven, with imports rising above exports largely driven by crude prices.

Expectations are for input prices to moderate their rise. They are also expected to grow by 1.1%, while output prices are forecast to rise by just 0.6%.


Source link  
Trump Hits Mexico With Trade Tariffs

In a shift of focus from China, the Trump administration slapped Mexico with trade tariffs. The administration announced that it will impose...

USD maintains mains on growing cautious

The US dollar index held strong on Wednesday amid a mixed sentiment in the market. The 10-year Treasury yields hit a fresh 20-month low while equity...

Volatility could pick up as markets open

Lack of economic news or developments within the global themes played on the currency markets on Monday. With the US and UK markets closed on Monday...


Markets open to a slow trading day

Following a volatile week, we start today with both the US and UK markets closed due to bank holidays. This leaves most of the heavy lifting to the...

FOMC Minutes Urge Patience

The Federal Reserve released the monetary policy meeting minutes late yesterday. The minutes revealed that policymakers were committed to keeping...

New Zealand Retail Sales Rises 0.7% In Q1

The latest retail sales report from New Zealand saw a modestly better print than expected. Quarterly retail sales rose 0.7% beating estimates of a 0.6% increase...


Markets Open On A Soft Note

Lack of economic data and fresh trade rhetoric saw the markets trading rather subdued on Monday. The US dollar index was trading flat although price remains...

Japan's Q1 GDP Rises 0.5%

Beating estimates, Japan's first-quarter GDP grew at a pace of 0.5%. On a year over year basis, Japan's GDP advanced 2.1% during the January...

USD Steady at a Two-Week High

The US dollar was seen holding on to the gains, settling near a two-week high by Thursday's close. The gains came as the trade tensions eased and focus...

  


Share it on:   or