New Zealand's terms of trade fell for a second straight quarter in the final three months of 2014, as prices and volumes of dairy exports declined, while import prices rose.

The merchandise terms of trade declined 1.9 per cent in the fourth quarter as prices of exported goods fell 1.8 per cent, seasonally adjusted, and import prices gained 0.2 per cent, according to Statistics New Zealand. The terms of trade, which measures the volume of imports that can be funded by a fixed volume of exports, has declined from a four-decade high reached in the second quarter last year.

Dairy products, the nation's biggest export commodity, continue to dominate trade data and excluding milk-based products, prices of exports actually rose 4.9 per cent in the fourth quarter. Dairy prices declined 15 per cent in the final three months of 2014, to be 28 per cent below their recent peak in the first quarter of 2014. Fonterra last week affirmed its 2015 milk payout at $4.70 per kilogram of milk solids, saying a rebound in prices this year gave it confidence it could meet that target.

"This downturn appears to be nearing completion - lower oil import prices will again counteract the fall in dairy export prices in the March quarter, and dairy prices will be on the rise again from the June quarter," said Michael Gordon, senior economist at Westpac Bank.

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The decline in the terms of trade was smaller than the 3 per cent drop forecast by economists. Year on year they fell 4.6 per cent, as export prices dropped 7.6 per cent, outpacing a 3.1 per cent decline in import prices.

The decline in dairy offset a surge in meat export prices and volumes in the fourth quarter. The export price of beef climbing 23 per cent to a record, lifting overall meat export prices by 12 per cent. Seasonally adjusted meat volumes gained 4.2 per cent and prices rose 15 per cent.

Seasonally adjusted forestry export values climbed 13 per cent and volumes rose 7.4 per cent.

Intermediate goods, used for further processing by local industry, led gains in imports, with volumes rising 1.6 per cent overall. A weaker New Zealand dollar contributed to the gain in import prices, which was partly offset by a 10 per cent decline in prices of petroleum and related products.

See the latest trade stats here: