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NZ's terms of trade lifts 0.6% in June quarter, below expectations

Monday 3rd September 2018

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New Zealand's merchandise trade rose in the June quarter, bolstered by stronger dairy and record meat prices, but fell short of expectations. 

The terms of trade, which measures the purchasing power of New Zealand’s exports relative to imports, rose 0.6 percent in the June quarter after falling a revised 2 percent in the March quarter, Statistics New Zealand said. Economists had expected a 1 percent rise, according to the median Bloomberg poll, although forecasts ranged from a 0.5 percent drop to a 1.7 percent lift. 

Terms of trade measures the purchasing power of New Zealand’s exports abroad and is an indicator of the state of the overall economy. The 0.6 percent lift means New Zealand can buy more imports for the same amount of exports. 

Export values rose 3 percent to $13.4 billion in the second quarter, with a 1.1 percent lift in volumes and a 2.4 percent lift in prices. The value of imports rose 1.7 percent to $15.1 billion as prices increased 1.7 percent and volumes advanced 0.9 percent. The figures are seasonally adjusted.

On the export side, dairy prices rose 3.2 percent, with milk powder up 7.1 percent, cheese increasing 1.2 percent, and butter up 1 percent. Dairy volumes rose 5.2 percent, while values increased 7.6 percent.

Meat export prices rose 3.6 percent, with lamb up 5.4 percent and beef up 1.7 percent. Both total meat and lamb are at record prices, Stats NZ said.

Wool export prices rose 4.8 percent as volumes fell 2.1 percent and values rose 1.2 percent. 

On the import side, petroleum and petroleum product prices rose 10 percent, following a 7.9 percent increase in the March 2018 quarter. Crude oil prices rose 14 percent, volumes fell 35 percent, and values slipped 26 percent. Crude oil volumes and values are not seasonally adjusted. 

“The Marsden Point refinery maintenance shutdown during the June quarter led to the fall in volume of crude oil imported,” business prices manager Sarah Johnson said.

Stats NZ also noted that New Zealand's dollar fell 1.5 percent in the June quarter on a trade-weighted index basis and "a falling New Zealand dollar has an upward effect on export and import prices and their New Zealand-dollar values,” Johnson said.


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