Terms of trade fall but volumes rise

A larger rise in import prices has led to a fall in New Zealand's terms of trade but the country is importing and exporting more than ever before.

Statistics New Zealand figures released yesterday showed seasonally adjusted volumes for imports (up 0.7%) and exports (up 3.7%) both reached new highs in the September 2015 quarter.

Imports had reached new highs every quarter since June 2014, Statistics NZ prices senior manager Chris Pike said.

The terms of trade fell 3.7% in the September quarter due to import prices rising more than export prices.

The fall followed a 1.5% rise in the June quarter.

Prices for imported goods rose 7.3%, their largest increase in seven years, with petroleum products up 15%.

Export goods prices rose 3.4% with meat prices up 8.1%. Both imports and exports had widespread price increases, he said.

The New Zealand dollar fell 8.4% in the quarter, its largest quarterly fall in nearly seven years, which pushed up both import and export prices.

Despite the quarterly rise in imported petroleum prices, they were still 25% lower than a year earlier.

Excluding petroleum prices, import prices rose 6.5% in the quarter.

For beef exports, prices (up 10%), seasonally adjusted volumes (up 12%) and values (up 23% to $900 million) all reached new highs.

A small drop in dairy prices had a flattening effect on overall export prices. Volumes rose 11%, Mr Pike said.

ASB economist Nathan Penny said the import price strength was likely to be temporary.

Petrol prices, as an example, had fallen 5% in the December quarter to date.

At the same time, global inflation remained weak, in line with the global economy.

Westpac economist Michael Gordon said there was no market reaction to the release.

Although the result was softer than market forecasts, the terms of trade was typically a low-priority release for financial markets given it only reflected developments in commodity prices - especially dairy - with a sizeable lag.

 


Terms of trade

Terms of trade is a measure of purchasing power of New Zealand's exports abroad. A decrease means New Zealand can buy fewer imports for the same amount of exports. 


 

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