NZ terms of trade rise 2.4% in December quarter

By NZPA

Thursday 8th March 2007

New Zealand's merchandise terms of trade rose 2.4% in the December quarter, Statistics New Zealand said today.

The rise was stronger than the median 2.1% forecast of economists in a Reuters poll.

Merchandise import prices fell 6% compared to the economists' consensus expectation of a fall of 4.7%, while the export prices fell 3.7%, compared to the consensus of a 2.3% fall.

Seasonally adjusted merchandise export volumes fell 2.5% in the quarter, while import volumes rose 3.2%.

SNZ said the rise in the merchandise terms of trade index meant that in the December 2006 quarter, 2.4% more merchandise imports could be funded by a fixed quantity of merchandise exports than in the September 2006 quarter.

On an annual basis the index was up 3.6% in the year to the December 2006 quarter.

The falls in both merchandise export and import prices were a result of a rise by the NZ dollar against the currencies of this country's trading partners, and falling commodity prices, SNZ said.

Exchange rates published by the Reserve Bank showed the NZ dollar, as measured by the trade weighted index, rising 5.5% in the December 2006 quarter, the largest quarterly rise since the March 2003 quarter.

The 3.7% fall in the export price index was the largest decline since the December 2002 quarter.

The most significant contributor to the fall was the food and beverage index, which dropped 5.2%, due to lower meat and dairy products prices, SNZ said.

For the year to the December quarter merchandise export prices were up 8.2%.

The 6% fall in the merchandise import price index was the largest quarterly fall since the March 2001 quarter, and followed six consecutive quarterly increases.

A 20.8% fall in the petroleum and petroleum products index was the largest contributor to the import price index fall, due to lower crude oil prices, and was the largest fall in the index since the March 1991 quarter.

The petroleum index was volatile in 2006, having increased 19.9% in the June quarter and 5.4% in the September quarter, and for the year was still up 4.6%. That followed increases of 33.1% and 35.8% in the years to the December 2005 and December 2004 quarters.

In the year to the December quarter the merchandise import price index was up 5.3%.

Falls in the dairy products index (down 5%) and the non-food manufactures index (down 5.1%) were the main contributors to the 2.5% fall in the seasonally adjusted merchandise export volumes index.

Despite the fall in dairy product volumes, they were still higher than in the periods leading up to the record level reached in the June 2006 quarter, SNZ said.

The terms of trade for services rose 4.3% in the December quarter, but were down 1.3% for the year.

Services export prices were up 0.1% in the December quarter, and 4.3% for the year. Services import prices fell 4.1% for the December quarter.

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