KEY POINTS:
The buying power of New Zealand's exports unexpectedly fell by 1.9 per cent in the three months to September, thanks to higher oil prices and the rising kiwi weighing on export returns.
Market economists had been expecting no change or even a slight improvement in the quarterly data,
but Westpac chief economist Brendan O'Donovan said the weakness would likely be temporary.
While the 0.8 per cent decline in export prices over the quarter was driven most significantly by export returns for dairy products, international prices in that sector had increased in recent weeks.
At the same time, imports such as oil, which had driven the 1.1 per cent increase in import prices over the September quarter had become cheaper in the December quarter to date.
"All this adds up to a strong increase in the terms of trade for December," O'Donovan said.
ANZ economists said the fall in export prices despite increases in commodity prices over the period was due to the higher New Zealand dollar.
As measured by the trade weighted index, the kiwi rose 1.2 per cent over the quarter.
Nevertheless, ANZ said the terms of trade remained at historically high level and like O'Donovan, it expected a rebound in the December quarter.
Statistics NZ said the decline in dairy prices came largely through a 2.7 per cent decrease in milk powder prices and an 8.4 per cent fall in those for butter.
The September quarter was only the second three month decline in the dairy index over the past two and a half years.
Export prices were also affected by a 2.1 per cent decline in aluminium prices and a 1 per cent fall in those for food and beverages.
Those falls were partly offset by a 1.5 per cent increase in meat prices and a 1.1 per cent lift in those for forest products.
Merchandise import price rises came mainly from crude oil, petrol, diesel and jet fuel as well as plastics and iron and steel.
Those increases were partly offset by lower prices for machinery.
Yesterday's data showed an encouraging 5.2 per cent increase in export volumes, led by meat and forestry.
Import volumes were up by 1.6 per cent but only by 0.3 per cent excluding the fuel category which can be volatile due to irregular shipments.
EXPORT VS IMPORT
* The merchandise terms of trade - the amount of imports a fixed amount of exports can buy - fell 1.9 per cent during the September quarter.
* Import prices were up 1.1 per cent
* Export prices fell 0.8 per cent
* Export volumes rose by 5.2 per cent.
* Import volumes were up 1.6 per cent.