Terms of trade drop

The country's terms of trade fell 1.4% in the last three months of 2011.

The fall was expected – indeed, it is slightly lower than the average market forecast of a drop by 1.9% - and was driven by prices received for exports rising at a slower rate than prices paid for imports.

Export prices rose 1.7% in the quarter, following a 4% fall in the previous quarter and a 1.9% prior to that.

The main price rises were meat (up 3.4%), fruit (up 9.6%) and petroleum (up 4.3%).

Prices received for dairy fell 1.1%.

The period coincides with a steady fall in the New Zealand dollar, which dropped to just below US75cents just before Christmas.,

The currency has risen steadily since the New Year and hit US84cents early this week, for the first time since September last year.

That is delivering a currency headwind for exporters at present and is likely to contribute to a drop in the current quarter's terms of trade figures when they come out in three month's time.

On the import side, prices paid rose 3.2%, with petroleum goods (up 3.9%) mechanical machinery (up 3.7%), transport equipment ( up 3.2%) and food and beverages (up 3.3%) the main contributors.

On a volume (as opposed to value) basis export volumes are up 2.9% while import volumes are down 2.1%.

Export volumes are highest since June 1990, with dairy products rising 6.3%, the largest contribution.

Meat volumes fell 6.9%, although the impact of at least some of this is offset by the rise in prices received.

The main driver of the drop in import volumes were falls in consumer and intermediate goods – intermediate goods being the largest, with a 5.9% drop.

Some of this appears due to the always-volatile fuel and petroleum imports, which form part of this category,

Imports of consumption goods, a smaller category by volume than intermediate goods, fell 6.9%.

The volumes of capital goods rose 20%, with the main cause

Rob Hosking
Thu, 01 Mar 2012

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Terms of trade drop