
Fonterra’s Revised Milk Price Forecast: A Respite Amid Uncertainties
Fonterra has updated its farmgate milk price forecast for the 2023/24 season, elevating the range to $6.50-$8.00 per kgMS, a significant increase from the earlier $6.00-$7.50. The new midpoint is now pegged at $7.25, up from $6.75.
This adjustment offers some financial relief to farmers who are already under considerable economic stress. However, the future remains clouded with uncertainties, including the potential impacts of the El Nino weather pattern and a volatile global economy.
Record-Low Farmer Confidence: A Concerning Indicator
In the wake of Fonterra’s revised milk price, Rabobank’s Rural Confidence Survey for the September quarter disclosed an alarming decline in farmer confidence.
The net confidence in the broader agricultural economy plummeted to an unprecedented low of -72%, marking a 15-point drop from June’s -57%. Notably, 12% of farmers assessed their businesses as unviable, a concerning increase from the previous 8%.
Food Price Inflation: A Slight Easing Yet Still Burdensome
Statistics NZ’s Food Price Index revealed a marginal decline in annual food price inflation, which now stands at 8.0%. Despite a 0.4% drop when comparing September 2023 to August 2023, the index was up by 0.1% after seasonal adjustments.
While this slight easing offers a glimmer of hope, the persistently high inflation rate continues to strain households.
Record Migration and Housing Market Trends: Signs of Recovery
New Zealand recorded unprecedented highs in annual migrant arrivals and net migration gains in August 2023, with a net migration gain of 110,200. This surge has positively impacted both the labour market and the housing sector.
The Real Estate Institute of NZ reported a median sales price of $785,000 in September, a 2.3% increase from August, indicating a recovering housing market.
Tourism and Employment: A Slow but Steady Progress
Statistics NZ’s International Travel Statistics showed a gradual recovery in tourism, with overseas visitor arrivals reaching 2.69 million in the year to August 2023, up from 2.15 million in the previous year.
On the job front, the BNZ-SEEK Employment Report indicated a 2.3% decline in job advertisements in September, reversing the 2.1% increase observed in August.
Upcoming Economic Indicators: What to Watch
The main economic news for the coming week includes the release of the September quarter Consumer Price Index. Additionally, the aftermath of the weekend’s election and potential policy changes from the incoming government are factors to keep an eye on.
Additional Economic Metrics: A Snapshot
The NZ Dollar strengthened against the Trade Weighted Index by 1.0% over the week. Meanwhile, wholesale interest rates saw the yield for the 90 Day Bank Bill drop by 2 points to 5.68%, and the 10-year Government Bond yield decline by 12 points to 5.35%.
In summary, New Zealand’s economic environment presents a complex tapestry of cautious optimism and lingering challenges.
While certain sectors like migration and housing are showing signs of recovery, the agricultural sector, particularly farmer confidence, and high food inflation remain areas of concern.