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NZ 1Q terms of trade fall on weaker commodity prices

Friday 1st June 2012

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New Zealand's terms of trade fell in the first three months of the year as a decline in commodity prices weighed on exports, with dairy prices falling for the third straight quarter even as volumes rose.

The terms of trade, which measures how much imports can be bought with a fixed quantity of exports, fell 2.3 percent in the three months ended March 31, according to Statistics New Zealand. That’s a smaller decline than the 3 percent forecast in a Reuters survey. Export volumes fell 0.6 percent against an expectation of a 0.7 percent increase, while export prices dropped 3.8 percent

Prices of dairy products fell 5.6 percent in the first quarter, making the biggest downward contribution to the terms of trade. The fall follows a slide in prices in Fonterra Cooperative Group’s GlobalDairyTrade sales this year which prompted the world’s largest exporter of dairy products to cut its forecast 2012 milk price payout and flag lower payments in 2013.

Fruit export prices fell 7.3 percent, mainly reflecting weaker prices for apples. Forestry products fell 4.2 percent and meat declined 3.6 percent.

Import prices fell 1.5 percent in the first quarter, less than the 2.1 percent drop forecast by economists and helping offset the slide in export prices. Prices of transport equipment imports fell 2.3 percent in the March quarter, leading the decline. Mechanical machinery import prices fell 1.8 percent and electrical machinery dropped 2.6 percent.

Terms of trade for services rose 1.8 percent.

BusinessDesk.co.nz

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