Terms of trade up 0.8 per cent in last quarter

The high New Zealand dollar had a significant impact on export prices in the December 2004 quarter, although the nation's terms of trade increased 0.8 per cent in the period, figures released today show.

Statistics New Zealand today issued the December quarter terms of trade figures, which measure how many imports a fixed quantity of exports buys.

The 0.8 per cent increase was higher than economists' predictions of no change in the terms of trade number. The rise came after a 0.3 per cent fall in the September quarter.

The export price index fell a provisional 1.2 per cent in the three months to December 31, following a dip of 1.2 per cent in the September quarter. Economists had expected a dip of 1.4 per cent.

The import price index fell 1.9 per cent in the December quarter, against a 0.9 per cent decrease in the three months to September 30. Economists had expected import prices to fall 1.4 per cent, the Reuters poll found.

Year on year, exports in the terms of trade index was up 4.8 per cent, against economists' predictions of a 5.2 per cent rise. Export prices were up 2.1 per cent, while imports were down 2.6 per cent. Economists had expected, respectively, a rise of 2.6 per cent and a fall of 2.5 per cent on these indices.

"The appreciation of the New Zealand dollar against our main trading partners' currencies has had a significant impact on export prices (in the December quarter)," Statistics NZ said in a statement.

The New Zealand dollar trade-weighted index was 3.6 per cent higher in the December quarter, from the September quarter.

"A 5.1 per cent fall in the index for non-fuel crude materials made the largest contribution to the overall decrease in merchandise export prices in the December 2004 quarter," Statistics NZ said.

"Lower prices for forestry products (especially wood pulp) were the main drivers in this fall," Statistics NZ said.

All the major export indexes -- pastoral and dairy, fish, food and beverages, non-fuel crude materials, and non-food manufacturers -- fell in the quarter.

In particular, the index for pastoral and dairy products fell 0.9 per cent in the three months to December 31.

"Falling prices for beef and veal, and milk power were the main contributors to this fall," Statistics NZ said.

The fall in the index price index could be pinned to dips in the prices of electrical machinery and apparatus (down 7.9 per cent), mechanical machinery (down 5.2 per cent), and food and beverages (down 3.0 per cent).

"Partly offsetting the falls were higher prices for plastics and plastic articles."

On a volume basis, seasonally adjusted merchandise export volumes rose 8.5 per cent.

"Despite increasing 34.1 per cent in the (December) quarter, diary volumes have not returned to the levels experiences during the latter part of the 2003/04 dairy season," Statistics NZ said.

Seasonally adjusted merchandise import volumes rose 2.0 per cent, the increase largely driven by more crude oil, partly refined crude oil and diesel being imported.

- NZPA