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NZ terms of trade gain 0.8% to record in fourth quarter as meat export prices, volumes rise

Thursday 1st March 2018

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New Zealand's merchandise terms of trade rose to a record in the fourth quarter after export prices outran imports as the value of trade in both directions rose.

The terms of trade, which measure of the purchasing power of New Zealand’s exports relative to imports, increased 0.8 percent in the three months ended Dec. 31 from a revised gain of 1.3 percent in the September quarter. The terms of trade have been rising each quarter since September 2016.

The terms of trade data comes two days after merchandise trade figures for January showed both exports and imports rose to record highs, although with imports rising almost twice as fast as exports, the trade deficit widened to $566 million, the biggest for a January month in more than a decade. Today's figures showed export values climbed 7.8 percent to $13.8 billion in the fourth quarter, made up of a 2.6 percent increase in volumes and a 4.9 percent increase in prices.

"Over 2018, we expect the terms of trade to remain at or near the record high," Nathan Penny, senior rural economist at ASB Bank, said in a note. "Dairy prices have lifted further so far over Q1, although on the import side oil prices have lifted similarly over the same period.  In addition, the global growth outlook has improved, meaning demand for NZ exports should remain firm and supportive of export prices."

On the import side, the value of imports jumped 13.5 percent to $14.5 billion as prices rose 4 percent and volumes rose 8.5 percent.

Meat was the standout export, with prices rising 7.5 percent led by a 12 percent gain for lamb to a record. Meat values rose 13 percent and volumes climbed 20 percent, Stats NZ said.

Dairy prices gained 7 percent, led by an 11 percent increase for butter, while cheese prices rose 6.9 percent and milk powder was up 5.4 percent. Dairy volumes fell 4.6 percent while values rose 4.7 percent. Forestry prices rose 7.3 percent, volumes were up 4.7 percent and values up 11 percent, while for wool, prices rose 10 percent, volumes surged 37 percent and values rose 47 percent.

Petroleum and petroleum products were the biggest contributor to import prices, rising 20 percent, while volumes fell 2.8 percent and values rose 14 percent. Crude oil prices rose 22 percent to the highest levels since the third quarter of 2015, volumes rose 1.8 percent, and values rose 19 percent.

Volumes of capital goods imports rose 32 percent, which the government statistician said was mainly due to an 85 percent jump in transport equipment, mainly reflecting imports of aircraft.


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