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Terms of Trade Rise 2.1 Percent

Terms of Trade Rise 2.1 Percent

The merchandise terms of trade rose 2.1 percent in the March 2004 quarter, according to the latest Overseas Trade Index figures released by Statistics New Zealand. The rise is due to import prices falling more than export prices in the latest quarter, and means that more imports can be funded by a fixed quantity of exports.

The appreciation of the New Zealand dollar (up 4.7 percent, according to the trade weighted index) against most of our major trading partners' currencies contributed to a 3.6 percent fall in merchandise import prices in the March 2004 quarter. Merchandise export prices fell 1.6 percent in the quarter, with high world commodity prices partly offsetting the effect of the strong dollar.

Both export and import prices have fallen since the March 2002 quarter.

Meat prices (down 3.2 percent) were the largest contributor to the overall fall in merchandise export prices in the March 2004 quarter. Also contributing to the fall were lower prices for dairy products (down 1.5 percent), casein (down 5.2 percent), and machinery and transport equipment (down 4.9 percent). A rise in forestry products prices, which recorded an increase of 0.4 percent, partly offset these falls.

Falls in prices for transport equipment (down 6.3 percent), mechanical machinery (down 8.9 percent), electrical machinery (down 3.5 percent), and food and beverages (down 2.4 percent) were the main contributors to the decrease in merchandise import prices. This was partly offset by higher prices for petroleum and petroleum products (up 4.0 percent), reflecting higher world prices.

Import and export volumes were higher (up 8.3 percent and 6.9 percent, respectively) for the March 2004 quarter, resulting in record levels of both merchandise import and export volumes.

Higher volumes of meat and forestry products were the largest contributors to the overall increase in merchandise export volumes. Meat export volumes for the March 2004 quarter were 8.1 percent higher than the December 2003 quarter and reached a record level. Higher export volumes of both lamb and beef were the principal reasons for the increase. Export volumes of dairy products rose 1.8 percent this quarter, surpassing the record level reached in the previous quarter.

The record volumes of merchandise imports were due to higher volumes of industrial transport equipment, intermediate goods, motor spirit and consumption goods, while volumes of passenger motor vehicles and capital goods fell slightly. Six large commercial aircraft and one smaller aircraft were the main contributors to the rise in industrial transport equipment. The latest rise in import volumes continues a series of quarterly increases dating back to the December 2001 quarter.

The terms of trade for services rose 4.6 percent in the March 2004 quarter due to import prices for services falling (down 4.5 percent) more than export prices (down 0.1 percent). This is the tenth consecutive rise in the terms of trade for services, reflecting the impact of the strong New Zealand dollar on services import prices.

Ian Ewing Acting
Government Statistician

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