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Terms of trade up 5.7pc in fourth quarter

NZN 28/02/2017 Paul McBeth

New Zealand's terms of trade rose in the final three months of 2016 as the recovery in global dairy prices bolstered the value of exports even as the volume of international sales shrank.

The merchandise terms of trade, which measures the purchasing power of the country's exports, rose 5.7 per cent in the fourth quarter after a 1.1 per cent decline in the third quarter, Statistics New Zealand said.

Seasonally adjusted export volumes fell 5.8 per cent, reflecting declines in the dairy and meat sector, but a 14 per cent gain in dairy prices helped limit the drop in the value of exports to just 0.6 per cent, at $11.3 billion.

Import volumes were up 1.2 per cent, while values rose a more modest 0.1 per cent to $12.3 billion due to cheaper electrical and mechanical items, including consumer electronics.

"The uptick of dairy export prices lifted New Zealand's terms of trade," business prices manager Sarah Williams said today. "However, dairy export prices are still about a third lower than they were three years ago."

Government data on Tuesday showed New Zealand's trade deficit widened in January due to the rebound in crude oil imports, from what was a slump in energy prices a year earlier.

Wednesday's figures show New Zealand's terms of trade with China, the country's biggest trading partner, rose 13 per cent in the December quarter, with export prices up 7.7 per cent and import prices down 5 per cent.

The volume of exports rose 29 per cent while values were up 39 per cent, due to the pick-up in sales of dairy products, while import volumes increased 6.9 per cent for a 1.6 per cent rise in volumes.

The country's terms of trade were at their highest level since June 2014, when the measure enjoyed a 40-year high during the dairy boom, although it's still 3.7 per cent below that peak.

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