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Terms of Trade Fall Further

12 December 2005

Terms of Trade Fall Further

The merchandise terms of trade fell 0.6 percent in the September 2005 quarter, following a decrease of 1.2 percent in the previous quarter, Statistics New Zealand said today. Merchandise import prices rose 2.5 percent while export prices rose 1.9 percent. The strong growth in merchandise export prices in the current quarter limited the fall in the latest terms of trade. However, in the year to the September 2005 quarter, the merchandise terms of trade index recorded a 0.8 percent increase.

Merchandise export prices continued upward in the September 2005 quarter (up 1.9 percent), following rises of 0.5 percent and 0.2 percent in the June 2005 and March 2005 quarters, respectively. The most significant contributor to this quarter's rise was a 3.0 percent increase in food and beverage prices, driven by higher prices for dairy products (up 4.0 percent) and meat (up 2.6 percent).

Merchandise import prices rose 2.5 percent in the September 2005 quarter following a 1.7 percent rise in the June 2005 quarter, reflecting higher world prices for petroleum and petroleum products in both quarters.

However, higher growth in overall imports this quarter was compounded by a weaker New Zealand dollar, particularly against the US and Australian dollars which are the most transacted currencies in New Zealand's overseas trade. The index for petroleum and petroleum products rose 11.7 percent in the September 2005 quarter, following a 24.0 percent rise in the June 2005 quarter. This index is currently at the highest recorded level.

The seasonally adjusted merchandise export volumes index fell 2.8 percent in the September 2005 quarter, and has now fallen for three consecutive quarters. Milk powder; milk and cream; and cheese in the dairy products index were the biggest contributors to the fall. These falls were partly offset by a 3.6 percent rise for meat, with the beef and veal index being the main contributor.

The seasonally adjusted merchandise import volumes index rose 0.5 percent in the September 2005 quarter, up for the fourth consecutive quarter and up 7.7 percent since the September 2004 quarter. A higher volume of capital goods was the main contributor to the rise.

Brian Pink

Government Statistician


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