Terms of trade continue to fall

The merchandise terms of trade fell 9.0 percent in the June 2009 quarter, following a fall in each of the previous four quarters, Statistics New Zealand said today.

The terms of trade index is now at its lowest level since the September 2006 quarter. The latest fall was due to export prices decreasing more than import prices, and means 9.0 percent less merchandise imports could be funded by a fixed quantity of merchandise exports than in the March 2009 quarter.

The merchandise export price index fell 11.6 percent in the June 2009 quarter, influenced by an 8.7 percent appreciation in the New Zealand dollar (according to the Reserve Bank's trade weighted index). The largest contributor was the food and beverages index (down 14.8 percent), driven by dairy products (down 24.1 percent) and meat (down 7.0 percent). Export prices are now at their lowest level since the September 2007 quarter.

Seasonally adjusted export volumes rose 7.0 percent in the June 2009 quarter. The increase in export volumes was mainly driven by higher volumes for dairy products (up 23.7 percent), petroleum and petroleum products (up 62.7 percent), and forestry products (up 14.6 percent).

The merchandise import price index fell 2.9 percent in the June 2009 quarter. Significant contributions came from decreases in chemicals and related products (down 7.9 percent), mechanical machinery (down 5.1 percent), and electrical equipment and apparatus (down 4.8 percent). In the June 2009 quarter, the influence of the appreciation of the New Zealand dollar on import prices was smaller than for exports, as the exchange rates the New Zealand Customs Service uses for valuing imports are lagged by at least 11 and up to 25 days.

Seasonally adjusted import volumes fell 1.9 percent in the June 2009 quarter, which is the fourth consecutive quarterly fall. In the latest quarter, intermediate goods (down 8.1 percent) made the largest contribution to the overall fall in import volumes. Increases in passenger motor cars (up 36.3 percent, following two big quarterly falls) and capital goods (up 41.0 percent) had a significant offsetting effect.