In a sharp contrast to the recent raft of bad economic news, New Zealand's latest trade data has provided some welcome relief.
The bad news is the country's terms of trade rose in the three months ended June, due to a drought related spike in dairy export prices.
Westpac economist Michael Gordon said it was a timing quirk that would soon be reversed.
Statistics New Zealand figures released yesterday showed the country's terms of trade rose by 1.3% in June, following a downwardly revised 1.2% rise in March.
''This result may seem odd given the backdrop of weak commodity prices but it is easily explained as a quirk of timing. World dairy prices briefly spiked in February March this year, on concerns a drought would curtail milk production in New Zealand.
''As it turned out, the drought was less severe than expected and dairy prices promptly fell again.''
Since there was typically a lag of about three months between price setting and the shipment of New Zealand dairy exports, it resulted in a 6% rise in dairy export prices in the June quarter. They would head lower again during the second half of the year, he said.
Statistics NZ prices manager Chris Pike said although dairy prices were up in the June quarter, helped by a weaker dollar, they were 28% lower than in the March quarter last year. Excluding dairy, export prices fell about 0.1% in June.
The rise in dairy prices in June followed four quarterly decreases. Seasonally adjusted dairy volumes fell while their value fell 1.8% to $2.8billion.
The GlobalDairyTrade auction (traded in US dollars) had fallen since March with significant falls in July and the first half of August, before regaining some ground, he said.
Seasonally adjusted export volumes fell 0.2% in June. Dairy, down 4%, and meat, down 4.2%, contributed the most to the fall.
Export petroleum products, fruit and forestry product volumes rose. Mr Gordon said the weaker New Zealand dollar had a muted impact on trade prices.
The NZ dollar trade weighted index was down 2.1% on average in the quarter, a fairly small movement relative to history. The exchange rate would have a more dramatic impact on trade prices during the second half of the year.
There was no market reaction to the release.
• Australia's current account deficit was $A17.1billion ($NZ19.1billion) in the June quarter, seasonally adjusted, from $A14.4billion in the previous quarter, official figures showed.
The surplus on goods and services fell by $A2.3billion in real terms, which would detract 0.6% from growth in the June quarter measure of gross domestic product (GDP), the Australian Bureau of Statistics said.
