NZ terms of trade falls 2% in fourth quarter as dairy, meat lead weaker export prices

Tuesday 1st March 2016

New Zealand's terms of trade declined in the fourth quarter as weaker prices for dairy and meat resulted in export prices falling more than import prices.

The merchandise goods terms of trade fell 2 percent in the fourth quarter as export prices declined 5.7 percent and import prices dropped 3.7 percent, Statistics New Zealand said. Seasonally adjusted export volumes fell 2.4 percent and import volumes rose 0.7 percent, while the seasonally adjusted value of exports fell 6.1 percent to $11.4 billion and the value of imports fell 1.9 percent to $12.7 billion.

Terms of trade measures the purchasing power of New Zealand's exports abroad. In the fourth quarter dairy export prices declined 13 percent, as volumes fell 0.9 percent and the value of exports dropped 6.7 percent to $2.9 billion. Milk powder and butter led the decline in dairy volumes, while the volume of cheese rose 4.8 percent to a record.

The average price for whole milk powder has dropped 18 percent at the four fortnightly GlobalDairyTrade auctions this year to US$1,890 a tonne as global milk supply continues to outweigh demand. NZX futures are predicting a gain in prices at this week's sale. The impact of weaker dairy has had an impact on the broader economy, with both KiwiRail and Port of Tauranga noting the drop in volumes in their latest results

Seasonally adjusted meat values fell 2.4 percent in the fourth quarter, having surged 16 percent three months earlier, Statistics New Zealand said. Export prices fell 5.1 percent while volumes rose 3.8 percent and the value of meat exports declined 2.4 percent. Beef led the prices lower, falling 6.6 percent, while lamb prices fell 4.2 percent.

Among imports, petroleum and petroleum product prices and value tumbled 25 percent in the fourth quarter. Petroleum isn't seasonally adjusted. Volumes were little changed, rising 0.1 percent.

The services terms of trade rose 2.1 percent, as exports rose 1.3 percent and imports fell 0.7 percent.

BusinessDesk.co.nz

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