The worsening NZ economy

NZ farmer sentiment worsens on softer prices, currency - survey

New Zealand farmer sentiment deteriorated to its lowest level in more than three years in September as softer commodity prices and a high currency weighed, a survey showed on Tuesday.

Reuters,

15 October, 2012

The Rabobank survey of around 450 farmers showed a net 29 percent of respondents believed the rural economy will worsen over the next 12 months, compared with a net 25 percent optimism level in the June survey.

It was the fifth consecutive quarterly fall in sentiment in the agriculture sector, with farmers also turning negative about their own outlook.

"Farmers' expectations of their own farm business performance had previously held up better than confidence in the agricultural economy as a whole, however this measure has also now showed some deterioration," said Rabobank General Manager Ben Russell.

"Overseas market conditions and rising input costs were also shown to be a concern."

Agriculture accounts for around half of New Zealand's NZ$48 billion ($39 billion) annual export earnings.

The trade-weighted New Zealand dollar has gained more than 5 percent so far this year.

Sheep and beef farmers were the most pessimistic of those surveyed as meat prices remained soft, while confidence in the dairy sector, New Zealand's biggest export earner, was generally flat.

"The 15 per cent lift in global dairy commodity prices we've seen since they troughed in July is likely to have curbed some dairy farmer pessimism," Russell said.

The world's biggest dairy exporter, New Zealand-based Fonterra, has lowered its forecast payout for the current season to NZ$5.65-NZ$5.75 kilo of milk solids.

The survey also showed farmers trimming their investment intentions with 84 percent expecting to maintain or increase spending from 89 percent in the last survey. ($1=NZ$1.23)

Service sector contracting

The service sector has contracted for the first time in more than two years - a further sign that economic growth is slowing in the second half of the year.

Radio NZ,

15 October, 2012

The BusinessNZ Performances of Services Index, which comprises more than two thirds of the economy, slid a fraction of a point to 49.6 from August's seasonally-adjusted reading of 50.

A reading below 50 indicates that the sector is shrinking. The sector comprises almost 70% of the economy and includes all service industries such as banks, accommodation, hospitality, transport and health.

Although the decline was small, it hit a broad sector of the econmy.

BNZ economist Doug Steel said the index is the latest in a series of indicators pointing to slower growth.

Mr Steel said BNZ has cut its gross domestic product growth forecast from 0.5% to 0.3%, raising the chances of a cut in the Official Cash Rate.

State pension scheme makes loss

The state service pension scheme, the Government Superannuation Fund has made a loss of $17 million in the year to June.

RadioNZ,

15 October, 2012

The Fund, which has 66,000 members, says after two strong years, the return was a 0.5% loss, compared with a 12% rise in 2011.

It says investments in emerging markets and foreign currencies failed to add value to the fund, while the high dollar impacted on returns from unhedged foreign assets.