Terms of trade decline

By Phil Boeyen, ShareChat Business News Editor

Tuesday 12th March 2002

Falling export prices and rising import prices caused a 2.2% drop in New Zealand's merchandise terms of trade in the December 2001 quarter.

Statistics New Zealand says the fall follows an increase of 1.1% in the September 2001 quarter and comprised a 1.8% drop in merchandise export prices coupled with a 0.4% increase in import prices.

"Price increases were recorded in several of the main import commodities. If mineral fuels (mainly petroleum and petroleum products) were excluded, import prices would have risen 1.1%."

Banking group HSBC says the 2.2% fall in terms of trade was greater than the market consensus of -0.8% and notes that the global downturn is starting to bite.

Although the 1.8% fall in export prices was slightly better than the bank had anticipated it says the surprise came in the merchandise import index.

"It had been expected to also fall in the fourth quarter, but instead rose by 0.4%.

"Although there were large falls in the price of petrol imports (-8.1%), iron and steel (-4.5%) and electrical machinery (-3.2%), these were more than offset by smaller but broader based rises in prices for food, crude materials, plastic, transport equipment and other manufactured goods imports."

Despite higher import prices and volumes HSBC says it still expects a strong rise of 1% or more in the headline production-based measure of GDP when it is published later this month.

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