Terms of trade fall from last quarter's 34-year high

The merchandise terms of trade index fell 0.5 percent in the June 2008 quarter, due to import prices rising more than export prices, Statistics New Zealand said today. Although there was a fall in the latest quarter, the terms of trade are still at the second-highest level since the March 1974 quarter – the highest level was in the March 2008 quarter.

The export price index rose 4.4 percent in the June 2008 quarter, while seasonally adjusted export volumes fell 3.7 percent, with food and beverages the main contributor to both movements. The food and beverages price index rose 3.8 percent this quarter, with meat being the main driver of the rise. At the same time, food and beverage volumes fell 9.2 percent, with dairy products and casein recording the largest falls. The volume of dairy products exported is at its lowest level since the September 2005 quarter.

The import price index rose 4.8 percent in the June 2008 quarter, while seasonally adjusted import volumes rose 5.4 percent. The price increase was driven by a 17.7 percent rise in the petroleum and petroleum products index, the largest quarterly rise since a 19.9 percent rise in the June 2006 quarter. When these products are excluded, the price index for merchandise imports rose 2.5 percent.

The rise in import volumes was driven by the capital goods index (up 38.1 percent), which reached a new high in the June 2008 quarter. An oil rig and a floating platform imported during April, with a combined value of $477 million, were the main commodities contributing to the rise in this index.