KEY POINTS:
New Zealand's terms of trade rose 2.9 per cent in the December quarter, right in line with expectations, figures from Statistics New Zealand (SNZ) show.
The terms of trade index, which measures the amount of imports that a fixed amount of exports can purchase, is at its highest
level since the March quarter of 1974.
Seasonally adjusted export volumes rose 10.7 per cent to a new high, while the export price index rose 5.4 per cent.
Seasonally adjusted merchandise import volumes were up 5.4 per cent, while the import price index rose 2.5 per cent.
The latest increase in the terms of trade was the fifth consecutive quarterly rise, SNZ said.
The latest increase was driven by exports of two commodity groups - dairy products and petroleum and petroleum products - both of which reached record levels.
UBS senior economist Robin Clements said the result was an ongoing capture of strong dairy prices, and was not yet being eroded significantly by high oil prices.
"It's an ongoing positive for the next year, as those high prices feed through into dairy incomes," he said.
Westpac economist Sharon McCaw saw room for export prices to rise further, and said the rise in export volumes suggested more activity than the Reserve Bank was expecting.
SNZ said seasonally adjusted export volumes rose in each quarter of 2007, putting the latest figure 9.7 per cent up on the previous high of September 2006.
Dairy product export volumes were up by over a quarter in the December quarter, to be 4.6 per cent up on the previous high in March 2007, with all the main dairy commodities recording rises.
An 82.1 per cent increase in petroleum and petroleum products export volumes was driven by the first full quarter of production from the Tui oilfield, and took the sub-index to 40.7 per cent above its previous high in the December 1996 quarter, SNZ said.
Other export volume increases in the December quarter included a 40.6 per cent rise in casein, and a 2.5 per cent increase in non-food manufactured goods.
Wool export volumes were up 21.8 per cent to its highest level since the December 2002 quarter, with the latest volume increase coinciding with the first increase in wool prices, of 5.1 per cent, in 18 months.
The largest export volume decline was a 2.9 per cent fall in forestry products, with wood, wood manufactures and wood pulp all down, while paper and paper products and newsprint were up.
A 12.8 per cent rise in dairy product prices was the major contributor to the 5.4 per cent rise in the merchandise export price index. Price rises were recorded for all dairy products.
In the year to the December quarter, the dairy products index increased 40.5 per cent, the largest annual increase since the year to the December 2000 quarter.
The largest contribution to the 5.4 per cent rise in seasonally adjusted import volumes was in capital goods, the index for which reached a new high - 11.5 per cent up on the previous high of December 2005.
Three large aircraft valued at more than $180 million were imported in the December quarter, compared to none in September, while an oil rig was also imported in the latest three months.
Import volumes have been rising since the June 2006 quarter, to now be 16.3 per cent higher than at that time, with successive highs recorded in each of the past five quarters.
For the first time since March 1992, import volume indexes for all the main broad economic categories rose in the latest quarter.
The 2.5 per cent rise in the December quarter import price index followed four consecutive quarterly falls.
The main driver of the increase was a 7.6 per cent rise in petroleum and petroleum products, with other contributions from higher prices for transport equipment, and food and beverages.
- NZPA
