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NZ first quarter terms of trade rebound on strong dairy volumes

Tuesday 4th June 2019

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New Zealand's terms of trade rebounded in the first quarter on record export volumes of dairy products and cheaper imported fuel. 

The terms of trade, which measures the purchasing power of New Zealand's exports relative to imports, rose 1 percent in the three months to March 31 reversing some of the 3.2 percent fall in the three months to December 31, Stats NZ said. 

The terms of trade is an indicator of the state of the overall economy, with the first quarter lift meaning New Zealand can buy more imports for the same amount of exported goods.

Economists had been expecting a rise of 0.5 percent, according to the median in a Bloomberg poll. The New Zealand dollar was largely unchanged after the release, trading at 65.97 US cents. 

Export volumes rose 5 percent in the quarter but export prices fell 2.6 percent. Both were strongly influenced by dairy - which accounted for more than 25 percent of all goods exported in the March quarter. The strong volumes meant that the total value of exported goods was up 2.3 percent to $14.3 billion. 

“Total export volumes are at their highest level since the series began in 1990, reflecting higher dairy volumes in the March quarter, after adjusting for seasonal effects," business prices delivery manager Sarah Johnson said.

Dairy export volumes lifted a seasonally adjusted 19 percent in the March quarter, but the value of dairy exports rose a more modest 9.5 percent because prices were weaker, Stats NZ said. 

Import volumes were up 1.2 percent but import prices were down 3.5 percent, Stats NZ said. The total value of imported goods was down 0.6 percent at $15.4 billion.

Fuel import prices fell 20 percent in the March 2019 quarter, reflecting much lower prices for petroleum and related products. Crude oil prices were down 21 percent, while petrol prices were down 26 percent. Diesel prices were also down 15 percent this quarter.

Lower fuel prices were a key driver in the drop in overall import prices, Stats NZ said.  

“Crude oil import volumes have been steady over the last five years, whereas the value of crude oil imports has been highly influenced by the price,” Johnson said.

(BusinessDesk)

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