NZ terms of trade rise to 37-year high

NZ terms of trade rise to 37-year high

By Jason Krupp

June 10(BusinessDesk) – New Zealand's terms of trade rose their highest level since 1974 in the first three months of this year, bolstered by higher dairy, meat and petroleum prices.

Exports gained 6.3% in the three months ending March 31, outstripping the 5.4% increase in import prices, resulting in a 0.9% improvement in the terms of trade, according to Statistics New Zealand. The increase marks the sixth improvement in a row.

Merchandise export prices showed a marked recovery following a 0.5% rise in the December quarter, and a 0.1% fall in the three months ending Sept. 30.

Today's data add weight behind the growing levels of optimism around the economic recovery, with yesterday's National Bank Business Outlook survey for May showing business confidence jumped to 38.3 in the month, up from 14.2 in April.

That followed the release of trade data earlier in the week which showed the nation’s trade surplus rose to a record $1.1 billion in April, beating expectations of a $600 million surplus.

The terms of trade index measures the amount of imports a nation can buy from a fixed amount of exports. Helping lift incomes, the New Zealand dollar fell 0.8% on a trade-weighted basis in the first quarter.

The gains in exports were led by a 5.5% increase in dairy prices, a 10% gain in meat prices, and an 18.6% increase in the price of petroleum and petroleum products in the quarter, the government statistician said today.

Import prices in the quarter rose on the back of a 20.3% surge in petroleum and petroleum product costs, which contributed to over half the overall increase. Excluding petroleum, import prices rose by 2.7% in the three months.

Merchandise volume exports fell 0.3% in the quarter, following a 4% increase in the December quarter, with meat, non-fuel crude materials and fruit leading the decline. Dairy volumes offset the slide to a degree, gaining 7.6% in the three months.

(BusinessDesk)

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