Terms of Trade record growth

New Zealand’s terms of trade rose 0.7 per cent in the September quarter to reach an all-time new record, Stats NZ said today.

Terms of trade is a measure of purchasing power of New Zealand’s exports abroad and an indicator of the state of the overall economy. It provides a more detailed reading of the flow of goods and services across the border.

The rise of 0.7 per cent this quarter was due to import prices falling more than export prices. 

Diagram for the September 2017 quarter.

Import movements in the motor vehicle industry contributed to the fall in import prices, with a 3.2 per cent decrease compared to the previous quarter ending in June 2017.

The drop in petroleum and petroleum product prices, which aren’t seasonally adjusted, had a significant effect on the overall decrease in imports. Prices fell 11.9 percent, with volumes down 5.6 percent and values down 17 percent.

The main reason, however, is due the increased price of meat and dairy exports.

“The terms of trade increased over the last year, driven by high meat and dairy prices, especially butter, to reach the highest level since the series began in March 1957,” international statistics senior manager Daria Kwon said.

“The previous high for the terms of trade was the June 1973 quarter.”

The services terms of trade rose 3.6 per cent in the September 2017 quarter. Services export prices rose 0.9 per cent, led by 3.2 per cent gain for transportation, while import prices for services imports fell by 2.6 per cent.

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