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NZ terms of trade rise in March quarter

NZN 1/06/2016 Paul McBeth

New Zealand's terms of trade unexpectedly rose in the first three months of the year as cheap petrol pushed down import prices while export prices were little changed.

The merchandise goods terms of trade, which measures the purchasing power of New Zealand's exports abroad, rose 4.4 per cent in the March quarter as export prices were unchanged and import prices fell 4.3 per cent, Statistics New Zealand said. The increase snapped two-quarters of declines and was better than the 0.2 per cent fall predicted in a Reuters survey.

Import prices were led by a 24 per cent slump in petrol and petroleum products, following on from a 25 per cent drop in the December quarter.

"The drop in import prices this quarter was largely due to falling world prices for crude oil," business prices manager Sarah Williams said.

"Import prices are now at their lowest level in nearly 30 years."

Oil prices have slumped as global producers maintain production to keep market share and fend off US shale-based gas producers. Cheaper energy costs have slowed the pace of inflation around the world and created problems for central banks which typically target a modest but higher increase in consumer prices.

The kiwi gained to 67.91 US cents from 67.67 cents immediately before the release.

The services terms of trade rose 3.6 per cent in the March quarter as prices for travel and other services helped lift export prices 1.5 per cent while lower imported transportation and travel prices led to a 2 per cent fall in import prices.

Seasonally adjusted merchandise export volumes fell 2.7 per cent and import volumes decreased 0.7 per cent, while the seasonally adjusted value of exports slipped 2.87 per cent and imports dropped 3.3 per cent.

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