By Paul McBeth
New Zealand’s terms of trade – the amount of imports that can be funded by a fixed quantity of exports – fell in the third quarter, driven by export prices for the nation’s primary sector exports continuing to fall from recent record highs, and a strong local currency.
The terms of trade index fell 0.7 percent to 1288 in the three months ended Sept. 30 as falling export prices outpaced declines in import prices and ended two months of quarterly growth, according to Statistics New Zealand. The index rose 2.4 percent to a 37-year high in the June quarter. The terms of trade were still 3.3 percent higher than in September 2010.
New Zealand’s export prices fell 4 percent over the period, compared to a 3.4 percent decline for import prices.
A 4.8 percent fall in export prices for dairy products led the decline, followed by a 9.1 percent drop in forestry exports and a 4.8 percent decline in meat products.
A strong New Zealand dollar eroded exporter profits during the period, with the currency climbing 4.2 percent on a trade-weighted basis over the quarter and touching a post-float high against the greenback just below 90 US cents at the end of July/start of August. The flipside of that equation is that it makes it cheaper for New Zealand firms to import goods. The kiwi has since declined as global fears over the state of world economy dim the appeal of riskier, higher-yielding assets.
The release comes a week after government data showed the merchandise trade deficit was smaller than expected in October as demand for New Zealand’s core commodity exports underpinned international sales. Still, the current fragility in global markets leaves local exports vulnerable to a downturn, and the New Zealand Institute of Economic Research today warned the fallout from Europe’s “debt mess” will probably drag on demand from the nation’s trading partners.
Export volumes fell 0.7 percent in the quarter to 1169, with a decline in non-food manufacturers including pleasure boat makers, while merchandise values dropped 3.4 percent to $11.17 billion. Import volumes gained 2.7 percent to 1696, while the value of inbound goods was flat at $10.97 billion.
The gain in imported products was led by an 18 percent lift in the volume of capital machinery and plant, including pneumatic elevators and conveyors, and a 16 percent increase in the volume of transport equipment, including railway wagons.
The terms of trade for services rose 3.1 percent to 1162, the highest level since December 2007, as the price for imported services fell faster than exported services.
(BusinessDesk)
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3 Comments
When I started farming in 1984 my cost were %30 of my gross sales, now the average is %80 -85. In 1999 when I purchased the farm I live on now my rates were $1100 this year I will pay over $8000 in rates and fees. Currency be dammed its about costs and most are government until this is addressed nothing will change. We can no longer afford our own government.
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