WELLINGTON: New Zealand’s terms of trade rose in the first three months of the year, snapping two quarters of decline, as a slump in the price of imported petrol offset weaker prices for dairy exports.
The terms of trade rose 1.5 per cent in the first quarter, according to Statistics New Zealand. That lagged behind the 1.7 per cent gain projected in a Reuters survey.
The nation’s terms of trade, which measures the quantity of imports the country can buy with a set amount of exports, reached a 40-year high in the second quarter of 2014 as a high kiwi dollar kept import prices in check.
They deteriorated in the second half of last year as dairy export prices declined and the currency fell from a post-float high on a trade-weighted basis. The gains may not last, given the price of crude oil has risen from its lows while dairy prices remain weak.
“This bounce in the terms of trade is likely to be reversed in the next couple of quarters, given that world oil prices have risen from their lows while dairy export prices have seen renewed declines,” said Michael Gordon, economist at Westpac Banking Corp.
“But even so, we believe that the current downturn in the terms of trade is nearing its end point. If we’re right, the trough in this cycle is still likely to be higher than the previous peak seen in 2011.” Dairy export prices dropped 6.3 per cent, while volumes fell 2.2 per cent in the latest quarter, leading a 3.7 per cent decline overall in export prices. Export volumes rose 1.4 per cent.
Meat prices declined 4.5 per cent while volumes climbed 4.6 per cent to the highest level since the series began in 1990. Prices of forest products rose 1.4 per cent and volumes fell 4.7 per cent. Imported goods prices fell 5.1 per cent in the first quarter as volumes edged up 0.1 per cent. Petrol and petroleum product prices tumbled 29 per cent to the lowest level since the June 2005 quarter, while the volume fell 14 per cent.
In seasonally adjusted terms, the value of exports fell 2.5 per cent to $11.4 billion while the value of imports fell 4.8 per cent to $11.8 billion. The terms of trade weakened against the nation’s biggest trading partners. For China, the terms of trade fell 4.4 per cent, as export prices fell 2.3 per cent led by dairy, and import prices rose 2.2 per cent.
Against Australia the terms of trade fell 7.7 per cent, as export prices fell 8.9 per cent, led by crude oil and cheese, and import prices fell 1.2 per cent.
The terms of trade with the US fell 3.3 per cent as export prices rose 0.3 per cent and import prices rose 3.8 per cent, and against Japan, they fell 1.4 per cent, as export prices fell 4.8 per cent and import prices declined 3.5 per cent. That was made up for by the rest of the world excluding the European Union, with the terms of trade jumping 18 per cent, as export prices were down 5.8 per cent and import prices down 20%.
