NZ terms of trade falls less than expected in fourth quarter

Thursday 1st March 2012

New Zealand’s terms of trades fell for a second quarter in the final three months of 2011 as export prices rose less than the price of imports in the face of a weakening New Zealand dollar.

The terms of trade fell 1.4 percent in the fourth quarter, adding to a 0.6 percent decline three months earlier, according to Statistics New Zealand. A decline of 1.9 percent was forecast for the latest period, according to a Reuters survey.

Prices for exported goods rose 1.7 percent, led by gains in meat and fruit and a decline in dairy, while import prices rose 3.2 percent led by fuel, machinery, transport equipment and food and beverages.

The terms of trade, which measures the amount of imports that can be funded by a fixed quantity of exports, rose to a 37 year high in the second quarter, driven by gains in export prices of dairy products, petrol products, meat and wool.

The decline in the terms of trade in the latest three months came as the nation recorded record fourth-quarter volumes of total exports and seasonally adjusted dairy shipments. The 2.9 percent gain in exports was driven by dairy products such as milk powder, the government statistician said. Import volumes fell 2.1 percent, seasonally adjusted.

“While the terms of trade remains high, we believe it has peaked for now and will moderate further over the course of 2012,” said Philip Borkin, economist at Goldman Sachs & Partners New Zealand. “This will weigh on national income growth. Net exports should make a positive contribution to 4Q11 GDP growth, at least partly offsetting an expected run-down in inventories built up over 3Q11.”

Among exports, prices of meat rose 3.4 percent, fruit gained 9.6 percent and dairy prices declined 1.1 percent. Prices of imported petroleum climbed 3.9 percent, mechanical machinery rose 3.7 percent, transport equipment gained 3.2 percent and food and beverages rose 3.3 percent.

(BusinessDesk)

BusinessDesk.co.nz

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