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Further Rise in Terms of Trade

Further Rise in Terms of Trade

The merchandise terms of trade rose 0.4 percent in the June 2003 quarter, according to the latest Overseas Trade Indexes released by Statistics New Zealand. The rise in the merchandise terms of trade is due to import prices falling more than export prices in the latest quarter, and follows an increase of 1.2 percent in the March 2003 quarter. An increase in the terms of trade means that more imports can be funded by a fixed quantity of exports.

Prices of merchandise exports decreased 1.4 percent in the June 2003 quarter and import prices fell 1.7 percent. Both export and import prices have recorded consecutive falls since the March 2002 quarter. The price falls in the June 2003 quarter were influenced by a 0.9 percent rise in the value of the New Zealand dollar as measured by the trade weighted index.

Price decreases for non-food manufactures (down 3.4 percent) were the major contributor to the fall in export prices in the June 2003 quarter. Price falls for forestry products (down 2.5 percent) and meat (down 1.9 percent) also contributed to the fall. An increase in dairy product prices (up 5.5 percent) reduced the overall fall in export prices. This was the first rise in dairy export prices since the September 2001 quarter.

Price falls were recorded in most of the main import categories in the June 2003 quarter, with price decreases for petroleum and petroleum products (down 9.2 percent), mechanical machinery (down 1.7 percent) and transport equipment (down 1.2 percent) having the greatest impact. If mineral fuels (mainly petroleum and petroleum products) had been excluded, import prices would have fallen only 0.6 percent in the June 2003 quarter.

Seasonally adjusted merchandise export volumes fell 3.8 percent in the June 2003 quarter, following rises in the previous two quarters. The main contributor was an 11.7 percent fall in the non-fuel crude materials sub-index of which wool, wood pulp and lamb skins were the main items to fall. Other sub-indexes to fall were dairy products (down 9.6 percent) and meat (down 5.3 percent), while fruit rose (up 33.8 percent).

The seasonally adjusted merchandise import volumes rose 4.8 percent, following a decrease of 0.5 percent in the March 2003 quarter. Passenger motor cars (up 24.2 percent), intermediate goods (up 4.9 percent) and capital goods (up 10.1 percent) were the main contributors to the rise.

The consumption goods index also rose, while the motor spirit index fell.

The terms of trade for services rose by 1.0 percent in the June 2003 quarter, recording the seventh consecutive increase. This was due to import prices falling (down 1.0 percent) while export prices were flat (down 0.1 percent) in the latest quarter.

Brian Pink

Government Statistician

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