Terms of trade biggest fall in 12 years - Statistics NZ

By NZPA

Thursday 12th September 2002

The rising New Zealand dollar in the June quarter contributed to the biggest fall in the country's terms of trade for more than 12 years, Statistics New Zealand said today.

The merchandise terms of trade index -- which measures the amount of imports that can be funded by a fixed quantity of exports -- fell 4.5 percent in the three months to June, following a rise of 1.5 percent in the March quarter.

The decrease, the largest since the December 1990 quarter, was on the back of a 5.8 percent rise in the New Zealand dollar in the June quarter, which eroded prices that exporters received for their goods.

Analysts polled by Reuters had expected a fall of 1.1 percent in the terms of trade.

Prices for merchandise exports fell by 5.9 percent in the quarter -- the biggest drop since March 1958 -- while prices for imports fell 1.4 percent.

Economists had expected falls on average of 4.1 percent and 3.0 percent respectively.

The quarterly fall in the terms of trade means that 4.5 percent fewer merchandise imports could be funded in the June 2002 quarter by a fixed quantity of merchandise exports, than in the March 2002 quarter. Price falls for exports were widespread, with the greatest impact from dairy prices dropping 16.7 percent, and meat down 4.6 percent.

"Lower world prices for many of the main export commodities, and the appreciation of the New Zealand dollar against all of our major trading partners' currencies in the last quarter, both contributed to the decrease in this quarter," Statistics NZ said. While prices for most imports also fell, there were rises in petroleum and petroleum products, and for cars.

Seasonally adjusted, the volumes for exports rose by 4.8 percent in the June quarter -- the largest quarterly rise since the September 1999 quarter -- following on from a 1.6 percent rise in March.

Volume rises were recorded in forestry products (up 19.6 percent), dairy products (up 13 percent) and meat (up 7.1 percent). Fish and fish preparations were the only exports to fall in volume.

The seasonally adjusted import volume index rose by 3.8 percent, continuing a trend for the last three quarters.

There were no imported items valued at more than $100 million each in the quarter, although a Seasprite military helicopter valued at more than $50 million was imported.

The terms of trade index fell by 4.1 percent compared with the June 2001 quarter, worse than the 0.5 percent fall picked by economists.

However, compared with the preceding June year, terms of trade for the year ended June 2002 rose by 0.6 percent.

The terms of trade for services rose by 3.3 percent in the quarter, with import prices down 4.1 percent and export prices down 0.9 percent.

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