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Petroleum Prices Drive Terms of Trade Down

Overseas Trade Indexes: June 2005 quarter (provisional)

Petroleum Prices Drive Terms of Trade Down

The merchandise terms of trade fell 1.0 percent in the June 2005 quarter, according to the latest Overseas Trade Index figures released by Statistics New Zealand. The fall in the index is due to import prices for merchandise rising more (up 1.5 percent) than export prices (up 0.5 percent), largely reflecting higher import prices for petroleum and petroleum products. However, when petroleum and petroleum products are excluded, the overall import price index records a decline of 0.7 percent in the June 2005 quarter.

The petroleum and petroleum products index rose 23.6 percent in the June 2005 quarter, following an 8.6 percent fall in the previous quarter. Higher prices for crude oil, and automotive diesel and partly refined petroleum, were the major drivers of this index in the latest quarter. Increases in the food and beverages index (up 1.3 percent) and the iron and steel index (up 3.7 percent) also contributed to the overall increase in import prices. Partly offsetting the rises were falls in the transport equipment index (down 2.4 percent), mechanical machinery index (down 2.6 percent) and the textiles, clothing and footwear index (down 1.4 percent).

Merchandise export prices rose 0.5 percent in the June 2005 quarter, the second quarter in a row where the merchandise export prices have resisted the effect of an appreciating exchange rate.

The most significant contribution to the rise in the June 2005 quarter came from a 1.3 percent rise in the index for non-food manufactured goods, which was driven by increases in the prices of casein and aluminium. For the second quarter in a row, the index for all pastoral and dairy products (down 1.9 percent in the latest quarter) was the most significant downward contributor to the rise in overall export prices, due to lower prices for fruit and vegetables, and lamb.

Seasonally adjusted merchandise export volumes fell 0.7 percent in the June 2005 quarter, following a 2.0 percent fall in the previous quarter. The meat, dairy products, non-food manufactures, and food and beverages indexes were the main contributors to the fall.

Commodities contributing to the fall were beef, and milk and cream.

@ The seasonally adjusted volume of merchandise imports rose 3.0 percent in the June 2005 quarter. The import volumes index is now at its highest level ever recorded. This index has risen 8.0 percent since the December 2004 quarter. Higher volumes of capital goods, consumption goods, crude oil, and passenger motor cars were the main contributors to the rise in total import volumes.

Brian Pink

Government Statistician


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