NZ terms of trade rise 4.4% in March quarter on cheap imported petrol

Wednesday 1st June 2016

New Zealand's terms of trade unexpectedly rose in the first three months of the year as cheap petrol pushed down import prices while export prices were little changed.

The merchandise goods terms of trade, which measures the purchasing power of New Zealand's exports abroad, rose 4.4 percent in the March quarter as export prices were unchanged and import prices fell 4.3 percent, Statistics New Zealand said. The increase snapped two-quarters of declines and was better than the 0.2 percent fall predicted in a Reuters survey. Import prices were led by a 24 percent slump in petrol and petroleum products, following on from a 25 percent drop in the December quarter.

"The drop in import prices this quarter was largely due to falling world prices for crude oil,” business prices manager Sarah Williams said. "Import prices are now at their lowest level in nearly 30 years."

Oil prices have slumped as global producers maintain production to keep market share and fend off US shale-based gas producers. Cheaper energy costs have slowed the pace of inflation around the world and created problems for central banks which typically target a modest but higher increase in consumer prices. The kiwi gained to 67.91 US cents from 67.67 cents immediately before the release.

The services terms of trade rose 3.6 percent in the March quarter as prices for travel and other services helped lift export prices 1.5 percent while lower imported transportation and travel prices led to a 2 percent fall in import prices.

Seasonally adjusted merchandise export volumes fell 2.7 percent and import volumes decreased 0.7 percent, while the seasonally adjusted value of exports slipped 2.87 percent and imports dropped 3.3 percent.

Volumes of exported dairy products dropped 8.4 percent, while values were down 6.4 percent, while meat export volumes shrank 14 percent for a 16 percent drop in value. Wool export volumes rose 27 percent and values were up 21 percent, while forestry product volumes increased 1.9 percent and values were up 3.1 percent.

For imports, the volume of petrol products climbed 23 percent while the value imported dropped 6.8 percent.

BusinessDesk.co.nz

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