Surge in aluminium prices helps lift trade figures

A surge in prices for aluminium exports helped lift the merchandise terms of trade index 1.1 per cent in the March quarter, Statistics New Zealand (SNZ) said today.

The figure was unexpectedly good with economists polled by Reuters having forecast a 1 per cent fall.

The terms of trade index measures how many goods can be imported for every dollar of exports.

SNZ said merchandise export prices were up 3.2 per cent, the largest quarterly increase since a 7.2 per cent rise in the June 2004 quarter.

The most significant contributor was non-food manufactures up 5.9 per cent, predominantly driven by a 22.6 per cent increase in aluminium prices.

The second most significant contributor to the rise in export prices was a 4.9 per cent rise in the forestry products index, with prices for wood exported as logs up 6.5 per cent, wood pulp up 5.1 per cent, and paper and paper products up 2.7 per cent.

The rise followed depreciation of the New Zealand dollar against currencies of our major trading partners, combined with increasing world prices for some of our major export commodities, SNZ said.

Import prices were up 2.1 per cent, with transport equipment up 4 per cent, pushed by higher prices for aeroplanes and other aircraft, and new passenger motor cars.

The petroleum and petroleum products index continued to rise although at a slower rate. In the March quarter it was up 4 per cent, following a 5.6 per cent rise in the December quarter and 11.3 per cent rise in the September quarter.

Weakness of the New Zealand dollar had been a factor in the import price rise, with the March quarter being the first since June 2004 that the currency had fallen against the currencies of all major trading partners, SNZ said.

Seasonally adjusted export volumes fell 2.4 per cent, with a 17.2 per cent drop in meat volumes the main contributor. The volume of meat exports was at its lowest level since the December 2002 quarter.

Seasonally adjusted import volumes were up 0.5 per cent with fuels and lubricants the main contributors.

The motor spirit volume index was up 20.3 per cent, following a 0.9 per cent fall in the December quarter. Movements in the index were often influenced by large irregular imports, SNZ said.

A fall in the number of cars exceeding 3000cc imported was the main contributor to a 22.9 per cent fall in the passenger motor cars sub-index during the quarter.

On an annual basis the terms of trade index was down 3 per cent in the year to the March quarter, the largest annual fall since a 5.1 per cent drop in the year to March 2003 quarter.

In the year to the March quarter the merchandise export price index was up 3.7 per cent. Merchandise import prices were up 6.8 per cent, the largest annual increase in the index since a 7 per cent rise in the year to the June 2001 quarter.

Westpac economist Andrew Fung told Reuters a slight drop in non-food manufactured exports partly reflected the fact the full effect of the exchange rate drop was yet to come through.

BNZ senior economist Craig Ebert said the annual rates of inflation in import and export prices were still "very high".

UBS NZ senior economist Robin Clements said the terms of trade were "far more positive than anticipated", with export prices up more strongly than expected.

But the effect of having export volumes down and import volumes up a little was likely to be that a lid would be kept on expectations of first quarter growth.

He doubted today's figures would do anything to alter the Reserve Bank's views on interest rates.

- NZPA