NZ import prices post biggest jump since 1984 on oil, weak kiwi

Wednesday 10th December 2008

New Zealand import prices posted the biggest quarterly gain since 1984, reflecting higher prices for crude oil and a weakening currency.

The 11% increase in import prices in the three months ended September 30 contributed to a 2.3% decline in the nation's terms of trade, according to Statistics New Zealand. The rise in import prices outpaced an 8.6% gain in prices for exports.

The figures don't capture the more recent slide in the price of crude oil, which dropped 1.7% to US$42.96 a barrel on the New York Mercantile Exchange, and the New Zealand dollar's 19% slide since September 30. The kiwi was recently at 54.15 U.S. cents.

"The terms of trade are likely to ease from here as sharply weaker soft commodity prices slowly filter through to export receipts," said Shamubeel Eaqub, economist at Goldman Sachs JBWere. A slowing domestic economy and weaker kiwi dollar "should also reduce import demand."

Prices for crude oil and fuel products surged 31% in the third quarter, while fertilizer prices soared by a record 67%. Prices also rose for imports of steel, machinery and computers.

Exports prices were lifted by increases for foodstuffs, steel and aluminium. Dairy 7.4% and meat advanced about 12%.

Export volumes declined 2.3% in the third quarter, paced by smaller shipments of dairy products and meat. Import volumes fell 5%, led by a 34% decline in petroleum.

By Jonathan Underhill

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