Terms of trade fall further but capital investment continues to rise
The country's terms of trade take another dip in the June quarter, falling 2.6%.
The country's terms of trade took another dip in the June quarter, falling 2.6%.
Data released by Statistics New Zealand today shows a continued decline in the balance between prices paid for imports and those received for exports.
The accompanying trade volume data, however, shows a more mixed picture.
First, the trade price data. Today's 2.6% fall is the fourth in a row, following a 2.3% fall in the first three months of the year and 0.6% and 1.4% declines in the previous two quarters.
The fall is driven largely by two factors, Statistics NZ says: a drop in world dairy prices and the high New Zealand dollar.
Overall, prices received for exports fell 1% while prices paid for imports rose 1.7%.
Dairy prices fell 2.6% in the March quarter and have fallen 14% for the past 12 months after a 7.7% rise the previous 12 months.
Meat prices fell 2.3%, mostly through a 7.6% drop in lamb, falling 7.3% for the year to June compared to a 19% rise the previous 12 months.
On the import side of the ledger, the main upward pressure came from fuel, with petroleum products rising 8.4% for the quarter and 10% for the year to June. This follows a 21% rise the previous 12 months.
The trade volume data shows a more complex picture. Volumes of both exports and imports declined – which underlines the subdued state of the economy.
Export volumes fell 0.4% – mostly because of a 4.9% fall in dairy products – but the trend for export volumes remains at a record high level, Statistics NZ says.
Import volumes fell 3.1%, with the main cause being a fall in imports of intermediate goods by businesses.
A fall was expected because the last two quarters have seen an unusualy large build up of inventories by businesses.
Imports rose 12% in the March quarter and the volume of such goods – stocks for businesses, plus fuel – is at the highest level ever.
The question for today's figures was not whether there would be a drop, but how big the fall would be. The drop is not as large as a number of economists were anticipating.
When the always-volatile fuel imports are excluded, imports rose 0.6% for the quarter.
More tellingly, and more optimistically, imports of capital goods by businesses continues to rise.
Capital machinery and plant imports rose 13% for the quarter, indicating New Zealand businesses continue to use the high New Zealand dollar and low interest rates to liff their investment.
Rob Hosking
Mon, 03 Sep 2012
Mon, 03 Sep 2012
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Terms of trade fall further but capital investment continues to rise
23495