NZ export prices post biggest slide since 1957, led by dairy, crude oil

Wednesday 10th June 2009

New Zealand export prices recorded their biggest slide since 1957 in the first quarter, led by a slump in dairy products, suggesting weaker returns from the nation’s overseas shipments will constrain economic growth this year.

Merchandise export prices fell 8.2% in the first three months of 2009 from the fourth quarter last year, the first decline in about two years, according to Statistics New Zealand. That’s the biggest quarterly drop since prices fell 9.1% in the final quarter of 1958, when Western Europe was creating its Common Market. Import prices fell 5.4% in the first quarter, resulting in a 3% decline in the terms of trade.

Prices of dairy products tumbled 21%, the biggest quarterly decline since the series began in 1950. New Zealand dairy farmers already are preparing for lower returns after Fonterra Cooperative Group last month forecast a 13% drop in milk payments for the 2010 season, citing a stronger New Zealand dollar and the reintroduction of U.S. dairy subsidies. While prices tumbled, dairy export volumes rose 14% in the first quarter.

“Although export volumes remain supported by strong agricultural production, in particular dairy, weak global demand has seen prices fall considerably and disappointing export incomes are likely to remain a drag on GDP over the next year,” economists at ASB said in a report.

New Zealand’s terms of trade shrank for the fourth straight quarter, according to the government statistician. The decline was milder than expected in the first quarter, with economists forecasting a 3.7% drop, according to a Reuters survey.

Terms of trade measure how much imports can be bought by a fixed quantity of exports.

Overall volumes of exports rose 2%, the first increase since the end of 2007, led by dairy products, sheep meat and wool. Import volumes declined 9.8% to the lowest in more than four years. Crude oil, automobiles and mobile phones paced the decline.

The New Zealand dollar trade-weighted index, as measured by the Reserve Bank of New Zealand, fell 7.1% in the first quarter.

Businesswire.co.nz

Comments from our readers

No comments yet