Terms of trade reach 35-year high

The merchandise terms of trade rose 0.6 percent in the December 2010 quarter to reach a 35-year high, Statistics New Zealand said today. Export prices rose while import prices fell. The rise means that 0.6 percent more imported goods could be funded by a fixed quantity of exported goods than in the September 2010 quarter.

“The latest rise in the terms of trade – the fifth in a row – means that the purchasing power of exports is higher than at any time since the March 1974 quarter,” Statistics NZ’s prices manager Chris Pike said. Meanwhile, seasonally adjusted export volumes rose in the latest quarter to their highest level since the series began in the June 1990 quarter.

Seasonally adjusted export volumes rose 4.5 percent in the December 2010 quarter, following a 2.4 percent fall in the September quarter. Dairy, meat, and forestry products were the major contributors to the rise in export volumes in the latest quarter, whereas in the September quarter they had contributed the most to the fall.

Seasonally adjusted import volumes rose 3.8 percent in the December 2010 quarter, which is the sixth consecutive quarterly rise. Total import volumes are 16 percent higher than a recent low point reached in the June 2009 quarter, but are still 6.4 percent below their peak in the June 2008 quarter. Capital goods (assets used in production) were the major contributor to the rise in the latest quarter. Consumption goods volumes also rose, while intermediate goods (used as inputs in producing other goods) fell slightly.

In the December 2010 quarter, prices for exported goods rose 0.3 percent. The rise was influenced by meat (up 5.1 percent), fruit (up 14.2 percent), and wool (up 23.0 percent). Dairy products (down 8.8 percent) made a significant downward contribution. 

Prices for imported goods fell 0.4 percent in the December 2010 quarter. The main contributors were mechanical machinery (down 5.4 percent), and electrical machinery and apparatus (down 5.7 percent). Petroleum and petroleum products (up 3.8 percent) had an offsetting effect. Excluding petroleum and petroleum products, prices for imports fell 1.2 percent in the December 2010 quarter.

The price and volume indexes for exports and imports are compiled mainly from overseas merchandise trade data.

Geoff Bascand 28 February 2011

Government Statistician