New Zealand’s terms of trade, which measure the quantity of imports the country can buy with a set amount of exports, have climbed to its highest level since December 1973 as dairy prices surged in the September quarter.
The terms of trade rose 7.5 per cent in the three months ended September 30 from the June quarter, the biggest increase in four decades, according to a Statistics New Zealand release on Monday.
That was more than twice the 3.1 per cent forecast in a Reuters survey of economists.
Export prices rose 8.9 per cent in the quarter, the biggest quarterly increase in three years, led by a 24 per cent jump in dairy prices with gains in milk powder and butter.
Forestry prices climbed 7.9 per cent in the quarter, and meat prices gained 6.8 per cent.
Import prices snapped four quarters of decline, increasing 1.2 per cent, with the main upward contribution coming from a 3.1 per cent lift in petrol prices.
Imports of electrical machinery, such as televisions, mobile phones and DVDs, fell 4.4 per cent.
‘While the terms of trade may edge a little higher yet, we expect increased global supply to weigh on key commodity prices next year, with softer export prices to lead the terms of trade lower in 2014,’ Westpac Banking Corp senior economist Anne Boniface said in a note.
She said the drought earlier this year weighed on the data, with smaller export volumes, though ‘an impressive rebound in dairy production this season … means this weakness will only be temporary’.
The New Zealand dollar fell 1.5 per cent on a trade-weighted basis in the September quarter, increasing the value of exports while making imports more expensive.
Source: Sky News