NZ terms of trade worsen in December quarter

By NZPA

Wednesday 12th March 2003

New Zealand's terms of trade were far worse than expected in the December quarter, falling 2.8 percent against the September quarter.

The index fell 7.7 percent compared with the same three months in 2001, Statistics New Zealand said today.

Analysts polled by Reuters had expected on average a 0.2 rise in the terms of trade on the previous quarter, and a 4.9 percent fall on the same quarter a year earlier.

The export index fell 5.3 percent on the previous quarter, compared with expectations of a 1.9 percent fall, while the import index was down 2.6 percent.

However, export volumes rose 2.2 percent for the quarter, Statistics New Zealand said.

New Zealand's terms of trade have collapsed from the high levels enjoyed during the agricultural boom years of 2000 and 2001.

A greater fall in export prices than import prices caused the decrease in the seasonally adjusted export and import values in the December quarter, Statistics New Zealand said.

The fall in the terms of trade means that fewer imports can be funded by a fixed quantity of exports.

"The fall in export prices reflects a 4.8 percent rise in the value of the New Zealand dollar in the December 2002 quarter as measured by the trade weighted index.

"Price decreases for dairy products (down 4.8 percent), meat (down 6.4 percent) and chemical and chemical products (down 7.6 percent) were the main contributors to the fall in export prices in the December 2002 quarter.

"Price falls were recorded in most of the import series, with lower prices for electrical machinery and apparatus (down 6.1 percent) and mechanical machinery (down 3.6 percent) having the greatest impact."

The main contributors to the rise in export volumes were dairy products, non-food manufactures, wool and meat.

The importation of several large aircraft with a value totalling more than $200 million was behind the 2.9 percent rise in merchandise import volumes, Statistics New Zealand said.

A 2.4 percent fall in consumption goods volumes partly offset rises in both the capital goods and intermediate goods volumes.

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