NZ terms of trade falls but hangs on to gains in last 3 years

New Zealand's merchandise terms of trade fell 0.9% in the December quarter from the September quarter as import prices rose faster than export prices, Statistics New Zealand (Stats NZ) said. This was the third consecutive quarter in which terms of trade fell. Merchandise terms of trade grew 1.9% from the December quarter in 2007. However, the fall was less than expected by economists, who had expected a 2% drop. The three consecutive drops have been relatively small, suggesting that the terms of trade is hanging on to gains made over the last three years. "The merchandise import price index rose 3.4% in the December 2008 quarter, following a 9.6% rise in the September 2008 quarter," Acting Government Statistician Cathryn Ashley-Jones said. "The most significant contribution in the latest quarter came from increases in mechanical machinery prices (up 18.3%), due to higher prices for computers and machinery parts. This rise was partly offset by lower prices for petroleum and petroleum products (down 22.4%)," Ashley-Jones said. "The merchandise export price index rose 2.5% in the December 2008 quarter, compared with a rise of 8.6% in the September 2008 quarter. Food and beverages (up 6.5%) made the largest contribution to the overall rise in export prices, driven by dairy products (up 5.8%) and meat (up 4.9%). A 31.6% fall in the petroleum and petroleum products index had the most significant offsetting impact on the overall rise in export prices," she said. The services terms of trade fell 6.5% from the September quarter, back to levels last seen in 2006. Services export prices rose 3.1% and import prices rose 10.2% from September.