Surging dairy prices drive biggest jump in terms of trade for 34 years

Thursday 10th June 2010

Prices of dairy products surged 32% in the first quarter, which combined with a weaker kiwi currency in driving the biggest increase in New Zealand’s terms of trade for 34 years.

Export prices gained 10.3% in the first three months of the year, while import prices rose 4.2%, resulting in a 5.9% increase in the terms of trade, according to Statistics New Zealand. That’s the largest quarterly increase since the first quarter of 1976.

Export prices are gaining after four consecutive quarters of decline, helping underpin the economy’s recovery from recession. Reserve Bank Governor Alan Bollard, who raised the official cash rate for the first time in three years today, noted “very strong” export receipts, which will “substantially boost primary sector incomes over the coming year.”

The terms of trade index measures the amount of imports a nation can buy from a fixed amount of exports. Helping lift incomes, the New Zealand dollar fell 0.3% on a trade-weighted basis in the first quarter.

The gains in dairy prices were led by a 48% surged in the price of butter, a 30% gain in milk powder and a 29% increase for cheese, the government statistician said today.

Prices also rose for casein and aluminium, the report said.Import prices were led by a 9.6% gain in the price of fuel Volumes of exports gained 3% while import volumes fell 2.8%.

Businesswire.co.nz

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