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Terms of trade surge to highest level since 1973

Revenue from exports has just reported a bolter, returning the terms of trade to the highest level since the end of 1973. 
 
The terms of trade - which measures the purchasing power of New Zealand exports - rose 7.5% in the September quarter, taking it to the highest level since just before the combined meat and wool price slump and oil price sextupling of 1974 sent them into a downward spin. 
 
The 7.5% increase is well above the Dow Jones consensus forecast of economists, which had the increase at 2.9%.
 
Prices for export goods rose 8.9%, mostly due to dairy prices - but even without this, the increase was 2.5%. Dairy prices rose 24%, but forestry was also up, by 7.9% and meat was up 6.8%.
 
On the services side - which has often been a negative - is also on the up, increased by 1.0%.
 
The other key thing about today's figures is the volume of trade is falling even as the revenue from that trade is surging. 
 
Volumes of exports fell 2.1% - and dairy led the way, with a  2.7% drop. This follows a 16% fall the previous quarter. The trend for dairy exports is 24% below the high point at the end of last year. 
 
On the import side, volumes are up 5.6%.  Leading the pack is a further pick up in capital goods imports although this is swung upwards for the quarter by one large item - an oil drilling platform. Capital imports rose 32.2% overall in the quarter, following a 20.1% rise the previous quarter. 
 
Imports of consumption goods rose 2.8%.

More by Rob Hosking

Comments and questions
2

Great news for NZ Inc!

Now, if we could just figure out how to retain some of the many billions in banking profits that gush out to Australia every month we'd be in much better stead again.

Not much good news for a growing economy here. Most of the consumable goods increase is higher petrol prices. Other consumable goods only grew very marginally - albeit for the first time in 5 quarters.