Commodity price index hits second-highest level

A 1% increase in the ANZ commodity price index last month has seen the index lift to its second-highest level on record.

The index was now only 0.9% below the peak in prices recorded in April last year, economist Steve Edwards said.

International prices for 10 of New Zealand's main commodities increased in December, led by dairy products, and three fell and four were unchanged.

Cheese and butter recorded the largest rise, both increasing 7%, leaving cheese at a five-year high and butter at a two-year high. Skim and whole milk powder lifted 3% and 2% respectively.

After hitting a two-year high last month, the price of wool fell 12% in December, accompanied by a 4% drop in the price of pelts and a 1% easing in aluminium prices.

The forestry and seafood subgroups lifted to record highs. The dairy subgroup moved to a seven-month high but remained 6.3% shy of its highest level. In contrast, the level of aluminium prices eased to a four-year low, Mr Edwards said.

Westpac senior economist Anne Boniface said robust demand for New Zealand's key commodity exports, combined with tight supplies in some sectors, had been supporting prices at high levels.

While the bank expected increasing supply to put downward pressure on prices this year, the strength of demand from emerging economies should limit the down side, she said.

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