Talk Money with Tony Field – July 22, 2015

China has overtaken the United States as the world's biggest market for ice cream (file)
China has overtaken the United States as the world's biggest market for ice cream (file)

Tourism could soon overtake dairy as New Zealand's top export earner.

Figures released yesterday by Statistics New Zealand show total visitor arrivals for the year to June rose 9 percent and holiday arrivals were up 10 percent compared with the same period a year ago.

Total annual visitor arrivals peaked just short of 3 million. Growth from Australia, China and the United States is strong.

Arrivals from Australia were up 10 percent on a year ago, boosted by early ski season snow conditions and expanded trans-Tasman air capacity. The rise in the Australian dollar has also helped.

Arrivals from China were up 28 percent on a year ago. Infometrics says the medium-term picture remains healthy, but "recent wobbles in Chinese share markets could affect short-run confidence to travel".

It says the 25 percent fall in the New Zealand dollar against the US since July 2014 will also help the tourism sector.

Economists at Infometrics say tourism is likely to overtake dairy as New Zealand's biggest export earner within the next few months.

But it says that could be short-lived, with dairy likely to regain the number one spot next year once global commodity prices rise.

The rest of the top five are meat, forestry and international education.

Service industries like tourism and education are helping prevent our external trade deficit from getting too big. Service exports rose nine percent at the same time that goods exports fell two and a half percent.

Statistics New Zealand says net migration to New Zealand has reached a new annual record. But there are signs that it is levelling off.

A net 58,300 migrants arrived in New Zealand in the year to June. There were 115,700 arrivals in the year to June and 57,400 departures.

The numbers were boosted by Chinese and Indian students, and because fewer people left New Zealand for Australia.

The lift in arrivals helped boost the economy. But with more people looking for work, the increase in migration is also keeping a lid on wages and the increase in the population is putting more pressure on the housing market, especially in Auckland.

Here is my chat with Paul Henry about the migration and tourism numbers.

The New Zealand dollar has gained ground against all the major currencies, a day out from the next review of the official cash rate by the Reserve Bank.

The Kiwi is trading at 66.35 US cents, compared to 65.73 yesterday. It is buying 89.44 Australian cents, up almost half a percent. The kiwi is at 42.66 pence, a rise of just over 1 percent. And is almost unchanged against the euro, at 60.68.

Gold prices slipped further this morning, falling almost US$8 per ounce to $1099. That was a fall of 0.70 percent.

Silver was almost flat at US$14.78 per ounce. West Texas oil rose 21 US cents to $50.59. Brent crude is trading at $57.16.

China has overtaken the United States as the world's biggest market for ice cream.

Market research firm Mintel says that between 2008 and 2014, the total market value for ice cream sales in China, rose 90 percent to US $11.4 billion.

The US market grew at a slower rate, rising by 15 percent to US$11.2 billion.

Overall, global sales of ice cream reached US$50 billion for the first time in 2014.

While sales of ice cream in China continue to soar, US consumers still eat much more per person. They consume 18.4 litres per person per year, compared with four litres for China.

To put this in perspective the NZ Ice Cream Industry Association quotes figures from Statistics NZ that New Zealanders eat 23 litres per person each year.

The top five ice cream markets by volume globally are China (5.9 billion litres), followed by the US (5.8 billion litres), Japan (784 million litres), Russia (668 million litres) and Germany (545 million litres).

Overall, global sales of ice cream reached $50 billion for the first time in 2014, increasing by 9 percent on 2011 when sales were valued at $46 billion.

Mintel Global Food Analyst Alex Beckett says: "Rising incomes and an increasingly developed retail infrastructure and cold chain network are driving growth in the ice cream market in China. However, the vast array of locally produced, low-price brands present a challenge for global ice cream giants looking to develop there.

"China is now the powerhouse of the global ice cream market in terms of overall size, although for per capita consumption, it's the Americans who tuck into the most ice cream each year. The pace of development, coupled with the immensity of the population, is having an increasing impact on the Chinese ice cream market."

Mintel says that while emerging markets are helping the global volumes of ice cream, the product is experiencing challenging conditions in more developed markets like Europe and North America.

"Growth has been dampened by consumer diet concerns, competition from other categories, such as yogurt, and the perennial challenge of unseasonable weather. As the world economy's centre of gravity continues to shift away from the West, these challenges give ice cream giants all the more reason to extend their presence - and new product development investment - in more emerging economies, particularly in Asia."

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