Terms of trade surge to highest level since 1973
Rob Hosking | Monday December 02, 2013 | 2 comments
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%.